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**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**Form
      10-KSB**


(Mark
      One)


ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      fiscal year ended March 31, 2006





TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from ______________ to________________





Commission
      file number:  033-37099-S





**T-BAY
      HOLDINGS, INC.**


(Name
      of
      small business issuer in its charter)






**Nevada**
            
            **91-1465664**(State
                or other jurisdiction of
                incorporation or organization)
            
            (I.R.S.
                Employer Identification
                No.)








**18** **th** **Floor YongSheng Building, ZhongShan Xi Road, Xuhui District, Shanghai,
      China**


(Address
      of principal executive offices)     (Zip
      Code)





Issuer’s
      telephone number:


**86-021
      51539900**





Securities
      registered under Section 12(b) of the Exchange Act:  None.





Securities
      registered under Section 12(g) of the Exchange Act:





**Common
      Stock**


(Title
      of
      class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





**Note** -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
      under
      those Sections.





SEC
      2337
      (12-05)  **Persons
      who are to respond to the collection of information contained in this form
      are
      not required to respond unless the form displays a currently valid OMB control
      number.**





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x


1


State
      issuer’s revenues for its most recent fiscal year.  US$25,527,000





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.)





Note:
      If
      determining whether a person is an affiliate will involve an unreasonable effort
      and expense, the issuer may calculate the aggregate market value of the common
      equity held by non-affiliates on the basis of reasonable assumptions, if the
      assumptions are stated.





**The
      aggregate market value of the issuer’s voting stock held as of July 13, 2006 by
      non-affiliates of the issuers was US$25,845,509 based on the closing price
      of
      the registrant’s common stock.**





**(ISSUERS
      INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
      YEARS)**





Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court. Yes o No o





**(APPLICABLE
      ONLY TO CORPORATE REGISTRANTS)**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. **30,088,174**





**DOCUMENTS
      INCORPORATED BY REFERENCE**





If
      the
      following documents are incorporated by reference, briefly describe them and
      identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
      the document is incorporated: (1) any annual report to security holders; (2)
      any
      proxy or information statement; and (3) any prospectus filed pursuant to Rule
      424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
      documents should be clearly described for identification purposes (e.g., annual
      report to security holders for fiscal year ended December 24,
      1990).





Transitional
      Small Business Disclosure Format (Check one): Yes o No x


2


**PART
      I**





**Item
      1.**  **Description
      of Business.**





**GENERAL**





The
      Company was incorporated under the laws of the State of Utah on August 8, 1984
      with the name of "Sharus Corporation" with authorized common stock of 50,000,000
      shares with par value of $0.001 per share. On June 13, 1989 the domicile of
      the
      Company was changed to the state of Nevada in connection with a name change
      to
      "Golden Quest, Inc." On January 7, 2002, the name was changed to "T-Bay
      Holdings, Inc." as part of a reverse stock split of 400 shares of outstanding
      stock for one share. On January 17, 2005 the Company carried out a reverse
      stock
      split of 20 shares of outstanding stock for one share. After the reverse split,
      the Company has authorized common stock of 100,000,000 shares common stock
      and
      10,000,000 shares of preferred stock both with par value of $0.001.





On
      August
      1, 2005, the Company entered into an Agreement and Plan of Reorganization (the
      “Agreement”) between Wise Target International Limited, (“Wise Target”), Amber
      Link International Limited (“Amber Link”), Ms. Meilian Li and Mr. Xiaofeng Li.
      Pursuant to the terms of the Agreement, following due diligence, the Company
      acquired all of the outstanding stock of Wise Target and Amber Link, making
      them
      wholly owned subsidiaries of the Company. Wise Target and Amber Link together
      own and control 95% of Shanghai Sunplus Communication Technology Co., Ltd.,
      (“Sunplus”), a Sino-foreign joint venture. The Agreement required the Company to
      issue 18,550,000 shares of restricted common stock in exchange for all of the
      issued and outstanding shares of Wise Target and Amber Link. This transaction
      was subsequently completed on August 16, 2005.





We
      conduct our business through our 95% owned subsidiary, Shanghai Sunplus
      Communication Technology Co., Ltd., a Sino-foreign joint venture established
      in
      China in 2002, which provides a wide span of mobile handset design and other
      services to leading mobile handset brand owners in China. Sunplus also provides
      total solution services to its customers, starting from new product concept
      identification, handset exterior design, hardware and software design, material
      procurement, production, and after-sale maintenance services. Customers include
      Huizhou Rui Xing Electronics Co., Ltd. (“Rui Xing Electronics”), Huizhou Qiao
      Xing Famous Technology Co., Ltd. (“Qiao Xing Famous Technology”), CEC Telecom
      Co., Ltd. (“CECT”), Shenzhen LaiDi Electronics Co., Ltd. (“Shenzhen LaiDi”) and
      Huizhou Liyin Electronics Co., Ltd. (“Huizhou Liyin”).




We
      focus
      on the vast and booming mobile telecommunication market in China. By working
      closely with chipset providers, we provide tailored mobile handset design
      solution services according to our customers’ demand. We believe we have strong
      design capabilities to design mobile handsets to support a broad range of
      wireless communications standards, baseband platforms and components. We also
      provide production support to facilitate our customers’ manufacturing and supply
      chain management processes. In addition, our special project teams work closely
      with our customers to monitor and coordinate the progress of each new design
      project. To further strengthen our presence in the market, we have also begun
      to
      work with our customers in providing customized handset solutions to mobile
      service operators. We believe the design solutions and services provided by
      us
      can help our customers in enhancing competitive strength and gaining market
      share.





**Services
      and Products**





We
      seek
      to maintain and strengthen our position as a provider of high quality mobile
      handset design services. We tailor-make our services and products based on
      the
      requirements of our customers. Our services mainly include:




Design
      Service





*Mobile
      handset design. We have special project teams to work closely with our customers
      to monitor and coordinate the progress of each new design
      project.


3




n
            Industrial
                and mechanical design. We design the exterior outlook and mechanical
                structure of a mobile handset. We adopt the user-orientation design
                concept and focus our product design on the personality of target
                end-users.





n
            Hardware
                design. In addition to the design of the core printed circuit board
                layout, we have also set up special engineering teams on the design
                of
                baseband and radio frequency parts of mobile handsets based on chip
                platforms.





n
            Software
                design. We design the software system for mobile handsets and its
                functional modules. We are capable of developing our own software
                in
                man-machine-interface and the driver software for LCD display, camera,
                harmonic ring tones and MP3 functions.





*Other
      Design Service Our design is also capable of designing other electronic
      devices.




Production
      Services




Based on the request of our customers, we also manufacture the components and/or
      the entire mobile handsets. We subcontract the production work to third party
      manufacturers mostly in the Shanghai area. We have a quality assurance team
      to
      monitor the production process to ensure the products can meet our quality
      requirements.





n
            Components:
                These mainly include printed circuit boards (PCB) and printed circuit
                board assembly (PCBA). They are the backbones of mobile
                handsets.





n
            Whole
                mobile handsets: Based on special requests of the customers which
                may not
                have the resources or facilities to manufacture the whole mobile
                handsets.





After-sale
      Services





n
            For
                the mobile handsets we manufacture for our customers, we will also
                provide
                maintenance services during the product warranty period.





**Business
      Model**





We
      generate our revenue mainly from design services and sales of products. In
      general, revenue from design services is the fee we charge for the design work
      or technical support services provided to our customers; revenue from the sales
      of products is the revenue we receive from selling whole handsets or components
      to our customers.





We
      charge
      design fees directly or indirectly for design solutions or services provided
      by
      us. The design fees consist of NRE ( non-recurring
      engineering) fees and
      royalty fees. NRE fees are one-off fees for a certain design project, while
      royalty fees are charged monthly or quarterly on every handset manufactured
      by
      our customers using our designs. Our royalty fees are charged at a certain
      rate
      ranging from RMB50-120 (US$6-14) per handset, according to the different PCBs
      and PCBAs which are unique to each phone model.





Subject
      to the requests from our customers, we also manufacture and sell to them whole
      mobile handsets which are designed by us.





The
      cost
      of design, including R&D cost and development cost of a new model, only
      accounts for a small percentage of the design fee we charge our customers.
      As
      for manufacturing and selling whole mobile handsets, the costs of sales,
      including materials and various components, takes up a much higher proportion
      of
      the selling price of the handset. In other words, the gross profit margin on
      design fees is higher than that of manufacturing and selling whole mobile
      handsets.


4




**Competitive
      Strengths**




Strategic
      Relationships with Business Partners




As
      the
      mobile handset industry is characterized by rapid technological changes, it
      is
      essential for us to keep abreast of and have access to the latest technologies
      by working closely with the world’s leading technology and platform providers.
      We believe we are one of the first independent mobile handset design houses
      in
      China to work with Skyworks, which has established a dedicated support team
      in
      Shanghai to support us in our design process.





We
      have
      also established good relationships with subcontractors which provide production
      services for mobile phone components and handsets.





Dual
      Processor Structure Design Platform





Since
      2005, we have been developing our own dual-processor structure design platform
      for mobile phones, i.e., using the Pegasus platform of Skyworks + SPR platform,
      together with the multi-media protocol processor from our know-how. Pegasus
      and
      SPR use the ARM7 core processor for digital base-band voice communication
      whereas our multi-media processor is mainly for multi-media data processing,
      such as encoding/decoding of voice signals and processing of video images.
      With
      the application of these dual-processor design platforms, we are able to develop
      a series of mobile phones with advanced multi-media functions, such as MP3
      playing, 3GPP/MPEG-4 video transmission, external memory cards, and PC
      connection and PDA functions. Management believes its technology is among the
      top in China and is comparable to some foreign brand names.





Quick
      Market Response





We
      pursue
      a market-oriented product development strategy, grasping end-users’ preferences
      and tastes. Our experience and expertise enables us to complete a design
      solution using the Skyworks platform in only 2 to 3 months.





Strong
      R&D capability




We
      have a
      professional and competent team of 100 engineers to handle the wide spectrum
      of
      mobile phone design jobs, including appearance design, structural design,
      electronics design, software design and machine-man interface design. Our Model
      SP8 was awarded the the iF Design Award China Winner 05 by iF International
      Forum Design.





We
      are
      able to develop new mobile phones based on chip-level modules, which we believe
      can enhance the flexibility of the product design in terms of phone size and
      functionalities. We believe there are only a few mobile phone design houses
      in
      China that are able to design mobile phones on chip-level modules.





Customized
      Products and Market Knowledge





We
      design
      many of our products based on our customers’ specifications. We work closely
      with mobile device manufacturers and brand name owners to understand their
      needs
      and product roadmaps. We also interface with our customers regularly to
      understand the mobile handset market, consumer preferences and trends in the
      industry. We believe this helps us to predict future trends and to assist our
      customers’ in the development of new products and functions and the setting of
      price range.




5


**Our
      Customers**





For
      the
      fiscal year ended March 31, 2006, our five largest customers in terms of revenue
      were:





**Revenue
                (US$)**
            ****
            **%
                of total revenue**1.
                Rui Xing Electronics
            
            
            3,100
            
            
            12
            %2.
                Qiao Xing Famous Technology
            
            
            2,400
            
            
            9
            %3.
                CECT
            
            
            2,200
            
            
            9
            %4.
                Shenzhen LaiDi
            
            
            2,100
            
            
            8
            %5.
                Huizhou Liyin
            
            
            2,000
            
            
            8
            %





**Company
      History of Sunplus**





October
      2002, Shanghai Sunplus Communication Technology Co., Ltd. was established in
      Shanghai, with only 40 employees.





December
      2002, Sunplus established its strategic cooperation with Skyworks, followed
      by
      the first mobile phone modules based on Skyworks’ chips platform. The first
      module developed by Sunplus was used by Panda Electronics Inc. (“Panda”) for
      making 150,000 mobile handsets and also used by major customer,
      CECT.





May,
      2003, Sunplus launched its first phone model design.





April
      2003, Sunplus started collaboration with French Wavecom in module R&D. The
      module was completed six months later, which was ordered by Huizhou Jialili
      Telecommunication Co., Ltd. (“Huizhou Jialili”), in its phone model T2, which
      became one of its most popular products.





December
      2003, Sunplus completed the development of an electronics platform, which was
      sold to Huaguan Electronics Inc. (“Huaguan”) for RMB 20 million (US$2,480,000),
      then followed by a 150,000 sets order from Panda and 200,000 units order from
      CECT.





As
      of
      January 2004, more than 500,000 mobile phone handsets designed by Sunplus had
      been sold in the China market. Major models included A606 Yinghu for Huaguan,
      Q747 Zhizhun for Philips, T520 Beetles for Hong Kong Zhongjian Telecom. Later
      on, Sunplus continuously received large orders from Panda, CECT, Huizhou
      Jialili, most of which exceed 200,000 units.





January
      2004, Sunplus established a partnership with Shenzhen Ankai Microelectronics
      Technology Co., Ltd. on multimedia chips platform to combine Ankai’s
      applications of multimedia chips with Skyworks’s radio frequency functions on
      basis of chips.





Our
      product of T520 Beetles was awarded by Sina.com as the Most Popular Mobile
      Phone
      for Female.





May
      2005,
      our design SP-8 for product CECT S569 was awarded top 100 iF Asia design. SP-8
      was also awarded the Fashion Color Nominate Prize.





On
      August
      16, 2005, we completed a reverse merger with Amber Link and Wise Target and
      subsequently we own a total of 95% shareholding in Sunplus.





May
      2006,
      Sunplus received the ISO9001:2000 certification of quality management
      system.


6




**Current
      Business Development**





During
      the fiscal year ended March 31, 2006, we have released 25 product solutions
      based on 5 mainboards. In October 2005, we released our new design solution
      9103. We believe it is among the first multi-media and handwriting solutions
      in
      the Chinese market. We combine multimedia functions with handwriting recognition
      feature. A 2-inch touch screen with functions of email, mp3, mp4, e-book, USB
      access make it one of the most popular phones in the market. The retail price
      for 9103 is RMB 1,400-2,500 (US$175-313) targeting young
      executives.





In
      April
      2005, we released the 9107 series. With the functions of handwriting and FM
      radio, it is targeted at mature customers, with retail price of RMB 1,000-2,200
      (US$125-275). 9107 series was one of our best sellers for the past fiscal year.





Series
      9701 and 9109, which were released January 2006, were our first design solutions
      with newly developed function of TV-output, which enables customers to connect
      phones and TV sets, watching movies and playing games on the phone. This model
      was well received by the market and became one of the best sellers in this
      product category.





In
      general, our designs are basically targeting the middle-end market and we
      compete with our competitors mainly in the aspects of phone appearance,
      practical applications, product reliability and price.





We
      aim to
      help our customers enhance their competitive capacity by accelerating the
      product-to-market process. We believe we were among the first design houses
      in
      China to provide multimedia, handwriting, TV-output solutions to our customers.
      We hope this will enable our customers to launch the products with these
      functionalities earlier than other brands.




For
      the
      fiscal year ended March. 31, 2006, there were approximately 1,200,000 units
      of
      Sunplus-designed mobile handsets sold in the market, compared to about 900,000
      units in fiscal year ended March 31, 2005, representing a 33% growth.





Our
      customer base nearly tripled during this fiscal year. We have a total of 34
      customers as of March 31, 2006, compared with 12 in fiscal year 2005,
      representing a 183 % growth. We added new customers including: Cosun
      Telecommunication Industry Co., Ltd., Huizhou Liyin , Universal Electronics
      Inc.and DiWangDa Inc. New customers were identified by our marketing team,
      introduced by our partners, suppliers and existing customers. National and
      international exhibitions provided us with new contract and customers, including
      some overseas customers. Expansion of our customer base was one of the factors
      for our growth in net profit.





**Products
      Geographic Coverage**





Through
      the sales network of our customers, products designed or manufactured by us
      are
      sold in major cities throughout China.





Starting
      from this fiscal year, we began to sell some of our whole mobile handsets
      directly or through our sales agent in Southeast Asia.





**Seasonal
      Factor**





We
      usually have higher revenue in the third or fourth fiscal quarter (period
      starting October 1 to March 31) and lower revenue in the first or second quarter
      (period starting April 1 to September 30). The seasonal factors affecting our
      revenue were mainly because our royalty fees are charged monthly or quarterly
      based on the amount of products sold during the period. Mobile handsets sell
      the
      most during long holidays including National Day, Christmas, New Year and
      Chinese New Year. The seasonal factor does not obviously affect our NRE fees
      revenue.





7




**Our
      Strategies**




Continue
      to increase our product offering




In
      order
      to maintain and increase our competitiveness, we intend to continue to expand
      our product offering by introducing about 30-35 new phone models per year.
      This
      could consist of the following categories:




a)
            High-end
                GSM/GPRS telecommunication terminals (mobile phones) with embedded
                functions including MMS, Java, camera, FM radio, Color LCD, email,
                MP3,
                finger-print identification, voice identification, as well as USB,
                SD,
                MMC, and blue tooth interfaces.





b)
            Business-use
                multifunction mobile phones - focused on email, web browsing and
                wireless
                e-commerce functions.





c)
            Third
                Generation Mobile Technology (3G) mobile phones to cater for the
                various
                value-added services such as electronic wallet, stock trade, video
                conferencing, real-time news broadcasting, etc,




Expansion
      into Overseas Markets




We
      anticipate a trend that international mobile handset vendors will start to
      outsource products and services in China. We plan to increase our marketing
      efforts to target at potential foreign handset vendors and foreign trading
      companies. We also expect most demand for our products and services will come
      from Taiwan and other places in Southeast Asia, Eastern Europe and Latin
      America.




Continue
      to strengthen our R&D capabilities




Our
      R&D capability is one of the main engines for our future growth. We will
      continue to strengthen our R&D capabilities by investing in advanced
      technology, where necessary, to facilitate the development of new products
      and
      improve the efficiency of our design process.




We
      plan
      to increase the strength of our current R&D team by recruiting additional
      professionals with relevant skills and expertise to augment the knowledge of
      our
      existing team as well as to train and update our staff with the latest
      development and trends in our industry.




Broaden
      Strategic Relationships in the Mobile Handset Value Chain




We
      believe our current strategic relationships with several leading wireless
      technology and platform providers such as Skyworks have provided us with access
      to advanced technologies and we hope this will help us build our reputation
      in
      the industry. We anticipate these relationships will also allow us to secure
      competitive pricing and shorter supply lead time for component procurement
      for
      our customers. We also intend to establish and strengthen the strategic
      relationships with our top customers to further secure our position as their
      preferred provider of mobile handset design services and hope to become an
      integral part of their overall mobile handset strategic and product
      roadmap.





Sale
      of Whole Mobile Handsets





In
      China’s GSM Market, we mainly provide design solution and cooperate with brand
      name owners. In overseas markets including Southeast Asia, Eastern Europe and
      Latin America, we plan to sell whole mobile handsets under our own brand name
      “Sunplus”. In domestic markets, all the whole mobile handsets we manufacture are
      under the brand name of our customers.




8


**Quality
      Assurance**





We
      believe that a high standard quality management system is crucial for
      maintaining our reputation. Our quality assurance team monitors hardware,
      software and mechanical design teams’ performance to ensure strict adherence to
      the quality standards required by our customers. The team conducts product
      reliability tests, including accelerated life tests, climatic stress tests
      and
      mechanical endurance tests. The team is also responsible for components
      qualification, prototype quality assurance, and submission of prototypes for
      FTA
      and CTA certifications. In addition, the team collects and organizes all
      relevant written documents produced and used throughout the design process.





We
      believe that a high standard quality management system is crucial for
      maintaining our reputation. Our quality objective is to pursue a higher quality
      standard to meet the needs of our customers. We will continue to improve the
      quality of our products and services and place quality as our first priority.





Through
      our quality assurance team, we adopt stringent quality procedures at the design
      stage, incoming quality assurance of components and parts, assembly testing
      and
      final quality testing. Our selection criteria for suppliers include reputation,
      time to supply, availability of components and parts, etc.





**Sales
      and marketing**





Our
      sales
      force consists of approximately 30 salespeople and technical support team.
      Most
      of them have many years of experience in the telecommunication industry. They
      are responsible for maintaining and establishing client relationships, trying
      to
      fulfill customers’ special needs, and introducing new technologies and
      applications in the telecommunications field.





The
      following is our strategy with respect to the marketing of our products and
      services:





Branding





We
      believe that our success is largely dependent on our reputation in the industry.
      Therefore, it is important that we continue to promote awareness of our design
      services, products and our company through various marketing
      activities.





Efficient
      Resources Utilization





We
      will
      continue to focus on our niche market, which is primarily local PRC mobile
      handsets at retail price of around RMB 1,000 to RMB 3,000 (US$125-US$375).
      We
      believe that our customers in this segment of the market are most likely to
      outsource mobile handset design to independent houses. In addition, we will
      intensify our efforts to increase overseas sales.





Build
      up a professional sales force





Through
      further recruitment and training, we aim to strengthen our marketing and sales
      team, improve efficiency and effectiveness of our marketing and sales management
      and procedures in areas of customer service, pricing, contractual terms and
      conditions, financial management, competitive strategies and market
      information.





Performance
      linked incentive scheme





In
      line
      with our belief that our sales personal are the pillars of a successful
      marketing strategy, we have put in place a performance linked incentive scheme
      where our sales and marketing staff are rewarded in accordance with their
      performance and achievements.




9


Establish
      our customer network which is our most important resource





We
      believe that the establishment of a network of customers is the foundation
      for
      our existence and future development. We will through the establishment of
      a
      customer data base and continual regular communication, strive to understand
      and
      meet the needs of our customers and build long term relationships with
      them.





Build
      our unique corporate culture





We
      will
      continue to advocate a corporate culture of being responsible, professional,
      aggressive, careful and virtuous.





Our
      marketing and sales department is led by our Vice General Manager, Mr. Lushi
      Xiang, who reports directly to our CEO, Mr. Xiaofeng Li. As of March 31, 2006,
      our marketing and sales team was comprised of 13 personnel. To access potential
      customers, we attend various exhibitions such as Tianjin Mobile Handset
      Telecommunication Exhibition and Cebit Exhibition in Germany. In addition,
      we
      advertise in magazines to enhance our company image.





**Intellectual
      Property**





We
      believe protection of our intellectual property rights is extremely important
      for our continuous success. As of the March, 31 2006, we have registered 17
      patents, of which 15 have been approved. All of them are patents for product
      appearance.





**Our
      competitors**





We
      estimate there are about nearly a hundred mobile phone design houses in China,
      including including Techfaith Wireless, Shanghai Sunplus, Shanghai Longcheer,
      Shanghai Simcom. Other major design houses include CEC Mobile, Shenzhen
      Wanchong, Shanghai Yuhua, Zhejiang Holley, STEP Technologies, Shenzhen Jinwave
      Technology and Shenzhen Yulong Communication Technology. We estimate there
      are
      about 10 design houses that may have competition with our Company.





Certain
      of our competitors are substantially larger, have significantly greater
      financial, marketing, research and development, technological and operating
      resources and broader product lines than we do.




We
      think
      that competition in our markets is based primarily on technology innovation,
      product performance, reputation, delivery times, customer support and price.
      We
      believe we are among the few design houses which is capable of both software
      design and hardware design as well as performing the whole spectrum of design
      activities and is developing functions or applications at chipset-level
      modules.




**Corporate
      Structure**




Sunplus
      is jointly formed by Wise Target, Amber Link and Shanghai Fanna Industrial
      Product Design Co., Ltd. (“Shanghai Fanna”). Wise Target and Amber Link are
      investment holding companies incorporated in the British Virgin Islands whereas
      Shanghai Fanna is a privately-owned company established in China in 2001. On
      August 16, 2005, T-Bay Holdings completed a reverse merger with Wise Target
      and
      Amber Link, which jointly hold 95% interests of Sunplus.




10




The
      current corporate structure of T-Bay Holdings is as follows:




**T-Bay
                    Holdings, Inc.**
                  **(OTCBB:
                    TBYH)**100%
                
                
                
                100%**Wise
                    Target**
                  **International
                    Ltd.**
                
                **Amber Link**
                  **International
                    Ltd.**
                
                **Shanghai
                    Fanna Industrial**
                  **Product
                    Design Co., Ltd.**74%
                
                
                
                
                
                21%
                
                
                
                5%**Shanghai
                    Sunplus Communication**
                  **Technology Co., Ltd.**




**Employees**





As
      of
      March 31, 2006, we have approximately 150 employees, detailed information as
      follows:





Our
      employees in terms of functions & departments:


Function
              Sales
              R&D
              Quality
                  Control
              Purchasing
                  & Logistics
              Other
                  MgtME
              EE
              SD
              ID
              PM
                &PSNumber
                  of
                Employees
              13
              15
              18
              22
              23
              11
              13
              25
              889Percentages
              8.8%
              60.1%
              8.8%
              16.9%
              5.4%




Our
      employees in terms of education :





Master
                & Ph.D.
            Bachelor
            Diploma
            OthersNumber
                of
              EMPLOYEES
            8
            76
            42
            22Percentages
            5.4%
            51.3%
            28.4%
            14.9%





As
      we put
      more focus on phone design services, we have expanded our engineering team
      and
      streamlined our manpower by about 30 in production, quality control and
      logistics for whole mobile handsets.





Our
      future success will depend, in part, on our ability to continue to attract,
      retain and motivate highly qualified technical, marketing and management
      personnel, for whom competition is intense. Our employees are not covered by
      any
      collective bargaining agreement and we have never experienced a work stoppage.
      We believe we enjoy good relations with our employees and have low turnover
      rate.


11


**Item
      2.**  **Description
      of Property.**





Our
      principal executive offices occupy a whole floor of space with total area of
      1,737 sq.m. on the 18 th floor
      YongSheng Building, Zhongshan Xi Road, Xuhui District, Shanghai, China. These
      leased premises house the design department, product testing facilities,
      maintenance and administration departments. The lease is US$19,000 per month.
      We
      subcontract the production of mobile phone components and complete handsets
      to
      third party manufacturers located in Shanghai and nearby provinces.





**Item
      3.**  **Legal
      Proceedings.**





None.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





None.





**PART
      II**





**Item
      5.**  **Market
      for Common Equity and Related Stockholder Matters.**





Our
      common stock is listed on the Over the Counter Bulletin Board under the symbol
      TBYH. At July 12, 2006 there were 327 shareholders of record holding 30,088,174
      shares of common stock. Holders of the common stock have no preemptive rights
      and no right to convert their common stock into any other securities. There
      are
      no redemption or sinking fund provisions applicable to the common stock. The
      following table shows the highs and lows of the closing bid and ask price on
      the
      Company’s stock for the past quarter when it began trading on the Bulletin
      Board.







**CLOSING BID**
            **CLOSING ASK****High**
            **Low**
            **High**
            **Low****2004**Jan. 2 thru March 31
            None
            None
            None
            NoneApril 1 thru June 30
            None
            None
            None
            NoneJuly 1 thru Sept. 30
            None
            None
            None
            NoneOct. 1 thru Dec. 31
            .20
            .05
            .25
            .18**2005**Jan. 3 thru Jan. 14
            .17
            .10
            .18
            .14Jan. 18 thru Mar. 31
            2.05
            .55
            4.00
            .95(After a 1 for 20 reverse
              split)Apr. 1 thru June 30
            1.15
            .55
            1.20
            .80July 1 thru Sept. 30
            2.18
            1.15
            2.20
            1.20Oct. 3 thru Dec. 30
            1.90
            1.20
            1.91
            1.30**2006**Jan. 3, thru March 31
            3.72
            1.28
            3.75
            1.30




The
      above
      quotations, as provided by Pink Sheets, LLC, represent prices between dealers
      and do not include retail markup, markdown or commission. In addition, these
      quotations do not represent actual transactions.


12




We
      have
      not paid or declared any dividends since inception and do not intend to declare
      any such dividends in the foreseeable future. Our ability to pay dividends
      is
      subject to limitations imposed by Nevada law. Under Nevada law, dividends may
      be
      paid to the extent that a corporation’s assets exceed its liabilities and it is
      able to pay its debts as they become due in the usual course of
      business.





**Recent
      Sales of Unregistered Securities**





None.





**Item
      6.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





**RESULTS
      OF OPERATIONS**





**Overview**





For
      the
      fiscal year ended March 31, 2006, our net income increased by US$5,661,000
      from
      US$4,421,000 to US$10,082,000, which represented a 128.0% growth. As a result
      of
      our change of business focus from manufacturing and selling whole mobile
      handsets to providing design services and mobile phone components, our net
      revenue decreased by US$8,337,000 from US$33,864,000 to US$25,527,000. Revenue
      from design services, which generally has a higher profit margin than selling
      whole mobile handsets, increased significantly. We reported per share earning
      of
      US$ 0.34 in fiscal year ended March 31, 2006; an increase of US$0.18, or 112.5%,
      compared to US$ 0.16 in the fiscal year ended March 31, 2005.





**Net
      Revenue**





(in
                US dollars)**Growth**
            ****
            **Amount**
            ****
            **%**
            ****
            **Amount**
            ****
            **%**Sales
                of components and handsets-
                Sales of handsets
            
            
            -80.9%
            
            
            4,953
            
            
            19.4%
            
            
            25,942
            
            
            76.6%-
                Sales of components
            
            
            1.7%
            
            
            1,902
            
            
            7.5%
            
            
            1,871
            
            
            5.5%-75.4%
            
            
            6,855
            
            
            26.9%
            
            
            27,813
            
            
            82.1%Revenue
                from design services
            
            
            208.6%
            
            
            18,672
            
            
            73.1%
            
            
            6,051
            
            
            17.9%NET
                REVENUE
            
            
            -24.6%
            
            
            25,527
            
            
            100.0%
            
            
            33,864
            
            
            100.0%








Our
      net
      revenue was US$25,527,000 for the fiscal year ended March 31, 2006, a decrease
      of US$8,337,000, or 24.6%, from US$33,864,000 of the previous fiscal year.
      Revenue from sales of mobile handsets and components was US$6,855,000 compared
      to US$27,813,000 in the last fiscal year, representing a 75.4% decrease, while
      the revenue from design services jumped to US$18,672,000 from US$6,051,000
      in
      the last fiscal year. Revenue from design services increased significantly
      by
      US$12,621,000, or 208.6%.





Our
      net
      revenue decrease mainly resulted from our reduction in sales of mobile handsets,
      as a result of the change in our business strategy. The percentage of revenue
      from sales of handsets decreased to 26.9% from 82.1% in last fiscal year. Sales
      of mobile handsets and components only generated US$ 6,855,000 net revenue
      in
      the fiscal year ended March 31, 2006, compared to US$27,813,000 in fiscal year
      ended March 31, 2005. Since March 2005, to better utilize our resources, we
      decided to focus on revenue from design services rather than manufacturing
      and
      selling whole mobile handsets for our clients. If necessary, we coordinate
      the
      production services provided by third parties to our clients. We believe this
      will enable us to shift our resources from manufacturing and logistics to
      R&D and design services, which are our core strengths. We proposed our new
      business model to existing customers and most of them readily accepted it.





For
      the
      fiscal year ended March 31, 2006, revenue from design services represented
      73.1%
      of total revenue, while revenue from manufacturing was 26.9%, compared to 17.9%
      from design services and 82.1% from manufacturing in the fiscal year ended
      March
      31, 2005. We anticipate we will continue to pursue this business model in the
      near future.


13


**Detailed
      information on sale of mobile handsets and components**




Sale
      of
      products decreased significantly from US$27,813,000 to US$6,855,000. The 75.4%
      decrease was mainly due to the change in business model of the company as
      mentioned above. Most of our existing customers; with whom we have developed
      long-term relationships have accepted our new business model. Instead of
      providing overall service including design, production and maintenance service,
      we focused on providing design solutions and technical support and abstained
      from most of the production service to our customers.





Most
      of
      the mobile handsets were sold in the domestic Chinese market during fiscal
      year
      ended March 31, 2006.





**Detailed
      information on revenue from design services**





Revenue
      from design services, which increased significantly from US$6,051,000 to
      US$18,672,000, represented a 208.6% growth year on year, and was the fastest
      growing proportion of our business. The growth was mainly generated from our
      existing customers and introduction of new customers.





In
      addition to the fees we charge for design solutions, we also receive royalties
      from each handset sold by our customers.





In
      April
      2005, the company launched its 9107 series which featured functions such as
      handwriting recognition, FM radio, blue tooth, MP3, MPEG4 3GP, WAP,
      USB&T-Flash, MMS, and CMOS. The 9107 series targeted middle- aged customers
      with a retail price of US$125-190. It was our best seller in the fiscal year
      ended March 31, 2006. The 9107 series has brought us new customers and in
      aggregate generated US$3,456,000 in design fees.





For
      the
      fiscal year ended March 31, 2006, about 1,200,000 units of the mobile handsets
      designed by us were sold in the market, compared to about 900,000 units in
      fiscal year ended March 31, 2005, represented a 33% growth.





**Cost
      of Revenue**





For
      the
      fiscal year ended March 31, 2006, the cost of revenue declined to US$9,612,000
      from US$24,203,000 in the fiscal year ended March 31, 2005, representing a
      60.3%
      decrease. Cost of revenue primarily consisted of the purchase cost of raw and
      processed materials and indirect cost of R&D and quality
      control.





**Detailed
      information on Cost of Revenue**





****
            
            **Fiscal
                year ended March 31**
            ****(in
                US dollars)
            ****
            ****
            ****
            **2006**
            ****
            **2005**
            ********
            ****
            **Growth**
            ****
            **Amount**
            ****
            **%**
            ****
            **Amount**
            ****
            **%**Cost
                of revenueRaw
                materials
            
            
            -64.4%
            
            
            8,226
            
            
            85.6%
            
            
            23,112
            
            
            95.5%Indirect
                R&D
            
            
            +141.1%
            
            
            176
            
            
            1.8%
            
            
            73
            
            
            0.3%Model
                making
            
            
            -68.7%
            
            
            51
            
            
            0.5%
            
            
            163
            
            
            0.7%Manufacturing
                expenses
            
            
            -54.2%
            
            
            252
            
            
            2.7%
            
            
            550
            
            
            2.3%Business
                tax
            
            
            +197.4%
            
            
            907
            
            
            9.4%
            
            
            305
            
            
            1.2%****
            
            
            
            
            
            9,612
            
            
            100.0%
            
            
            24,203
            
            
            100.0%





The
      significant decline came mainly from the decrease in purchase of raw materials.
      As noted above, with the change of business model, the portion of revenues
      from
      sale of handsets and components, which cost more than design, decreased
      significantly. Except for key materials such as chipsets and PCB blank boards,
      we don’t have to purchase raw materials as much as we used to, which greatly
      reduced our cost for raw material purchasing, and also contributed to a reduced
      cost of revenue. The cost of raw material was down US$14,886,000, or 64.4%,
      from
      US$23,112,000 to US$8,226,000.


14


**Gross
      profit**





Our
      gross
      profit was US$15,915,000 for the fiscal year ended March 31, 2006 compared
      to
      US$9,661,000 for the fiscal year ended March 31, 2005, representing a 64.7%
      growth. The strong increase in gross profit was mainly attributed to the
      increase of revenue from design services, which has higher profit margins than
      the manufacturing and sales of mobile handsets.





**Operating
      Expenses**





Operating
      expenses consists of selling expenses and general and administrative (G&A)
      expenses. For the fiscal year ended March 31, 2006, operating expenses were
      US$3,568,000, compared to US$3,392,000 for the fiscal year ended March 31,
      2005,
      representing a 5.2 % increase.




Detailed
      information of operating expenses for the year ended March 31, 2006 is as
      follows:





**Fiscal
                year ended Mar. 31
                (US$)**
            ********
            ****
            **2006**
            ****
            **2005**
            ********
            ****
            **Amount**
            ****
            **%
                of net revenue**
            ****
            **Amount**
            ****
            **%
                of net
                revenue**Operating
              Expenses
            
            
            3,568
            
            
            14.0%
            
            
            3,392
            
            
            10.0%Selling
              Expenses
            
            
            234
            
            
            0.9%
            
            
            75
            
            
            0.5%G&A
              expenses
            
            
            3,334
            
            
            13.1%
            
            
            3,217
            
            
            9.5%




Operating
      expenses during the fiscal year ended March 31, 2006 were US$3,568,000, 14.0%
      of
      revenue, compared to US$3,392,000 for the fiscal year ended March 31, 2005.





Selling
      expenses increased from US$175,000 to US$234,000. The increase was mainly
      because of market expansion and marketing-related expenses, such as
      international shows or exhibitions.





G&A
      expenses were US$3,334,000, 13.1% of revenue, compared to US$3,217,000 in last
      year. On the one hand, operating
      expenses decreased because about 30 staff left the company during the fiscal
      year due to the change in business focus, which resulted in a decrease of
      training expenses and salaries and allowances.




On
      the
      other hand, there was an increase in allowance for doubtful receivables and
      traveling expenses. The allowance for doubtful receivables was US$274,000 in
      the
      fiscal year ended March 31, 2006 compared to US$89,000 in the fiscal year ended
      March 31, 2005. Allowance for doubtful receivables is maintained for all
      customers based on a variety of factors, including the length of time the
      receivables are past due, significant one-time events and historical experience.
      Traveling expenses increased to US$211,000 from US$123,000 fiscal year ended
      March 31, 2005 due to more business trips taken by our executives.





**Interest
      Expense**





For
      the
      fiscal year ended March 31, 2006, we had sufficient cash to meet obligations,
      and therefore, do not need to use our credit lines offered by local banks and
      other parties. As of March 31, 2006 we have no credit lines. **** We
      have
      incurred interest expenses of only US$1,000 during the fiscal year ended March
      31, 2006.





**Minority
      Interest**





Minority
      interests represent the portion of Sunplus’ income that we do not own. For
      fiscal year 2005, the minority interests were attributable to the minority
      interests owned by Amber Link and Shanghai Fanna, which was 25% of equity
      interest in Sunplus. In fiscal year 2006, minority interests were attributable
      to the minority interest owned by Shanghai Fanna only, which was 5% of equity
      interest in Sunplus.


15




**Income
      Tax**





Sunplus
      is subject to PRC Income Tax. Pursuant to the PRC Income Tax Laws, the
      prevailing statutory rate of enterprise income tax in Shanghai is 27% (24%
      national income tax plus 3% local income tax).





Pursuant
      to the relevant laws and regulations in the PRC, Sunplus is entitled to an
      exemption from PRC income tax for two years starting from its first profitable
      year. As Sunplus’ statutory year-end is December 31, the exemption applied from
      January 1, 2003 to December 31, 2004. Sunplus is also entitled to three years
      of
      50% exemption after the expiration of the two years of full exemption. The
      50%
      exemption applies from January 1, 2005 to December 31, 2007. Therefore, Sunplus
      is now subject to a 13.5% income tax.





For
      the
      fiscal year ended March 31, 2006, Sunplus made an income tax provision of
      US$1,746,000 in total, compared to US$181,000 in the last fiscal
      year.





**Net
      income**





As
      a
      result of the above items, net income was US$10,082,000 for the fiscal year
      ended March 31, 2006 compared to US$4,421,000 for the fiscal year ended March
      31, 2005, representing 128% growth. The growth is mainly the result of
      significant increase of income from design services, which has higher profit
      margin than the sale of products.





**Earnings
      per share**





We
      reported earnings per share of US$0.34, based on 29,273,000 outstanding weighted
      shares. Our outstanding common stock was 30,088,174 as of March 31, 2006. We
      do
      not have any preferred stock issued or outstanding warrants or
      options.





**Assets**





**Cash
      and cash equivalents**




**Fiscal
                year
                ended****2006**
            
            **2005**(US$)
            
            (US$)Cash
              and cash equivalents
            
            
            4,673,000
            
            
            706,000




Cash
      equivalents increased by US$3,967,000 from US$706,000 as of March 31, 2005
      to
      US$4,673,000 as of March 31, 2006. The significant increase was attributed
      to
      the increase in operating cash inflow from the fast growth of our
      business.





**Accounts
      receivable, net**





As
      of
      March 31, 2006, accounts receivable amounted to US$14,600,000, an increase
      of
      US$5,861,000 or 67.1% compared to US$8,739,000 as of March 31, 2005. The
      increase was mainly because of the fast growth in design business. Manufacturers
      in China usually request longer credit term from design houses until their
      products are launched and sold in the market. The credit term of accounts
      receivable usually does not exceed 18 months.





The
      receivables are mostly from customers whom we have established long time good
      relationships. We believe there will not be a high risk that these receivables
      are unable to be collected.


16




The
      company also recognized an additional allowance of US$274,000 for doubtful
      receivables in the fiscal year ended March 31, 2006, compared to US$89,000
      for
      the fiscal year ended March 31, 2005, to ensure accounts and other receivables
      are not overstated due to uncollectibility. If circumstances related to
      customers change, estimates of the recoverability of receivables will be further
      adjusted.





Detailed
      information on allowance for doubtful receivables




**March
                31,
                2006**(US$)Balance,
              beginning of year
            
            
            89Additions
            
            
            274Balance,
              end of year
            
            
            363





**Notes
      receivable**





As
      of
      March 31, 2006, notes receivable was US$7,759,000, compared to US$0 as of March
      31, 2005. Notes receivable are mainly due to the settlement of accounts
      receivable as customers issued commercial notes as payments.





**Inventories**





Inventories
      comprised raw materials, work in progress and finished goods and are stated
      at
      the lower of cost or market. Market value represents replacement cost for raw
      materials and net realizable value for finished goods and work in progress.
      Substantially all inventory costs are determined using the weighted average
      basis. Costs of finished goods include direct materials, subcontracting charges
      and other overhead before the goods are ready for sale. Inventory costs do
      not
      exceed net realizable value.




**March
                31**
            ********
            ****
            **2006**
            ****
            **2005**(US$)
            
            (US$)Inventories
            
            
            1,982,000
            
            
            8,022,000




As
      of
      March 31, 2006, the company has inventories valued at US$1,982,000, a decrease
      of US$6,040,000 or 75.3%, compared to US$8,022,000 at March 31, 2005. The
      significant decrease was attributed to the change of our business model,
      focusing on revenue from design services.





Inventories
      consisted of the following:




**2006**
            ****
            **2005**(US$)
            
            (US$)Raw
              materials
            
            
            1,874,000
            
            
            4,298,000Work
              in progress
            
            
            358,000
            
            
            721,000Finished
              goods
            
            
            182,000
            
            
            3,003,000Total
            
            
            2,414,000
            
            
            8,022,000Less:
              allowance for losses
            
            
            (432,000
            )
            
            -Total
            
            
            1,982,000
            
            
            8,022,000




Raw
      materials of US$1,874,000 mainly include chipsets, PCB blank boards and
      multi-processor for making PCBA for mobile handsets. We maintain a certain
      level
      of key materials as a buffer to avoid disruption of operating activities, and
      to
      ensure on-time delivery of the PCBA to our customers.


17


The
      finished goods of US$182,000 consist of SP3and SP8. The SP3was released in
      mid-2004, and SP-8 in end of 2004.





We
      made
      allowance of US$321,000 against raw materials which were out-dated, US$37,000
      against obsolete work in progress, US$73,000 against finished goods of old
      models which may need to be sold at lower than cost.





**Property,
      Plant and Equipment**





**March
                31****2006**
            
            **2005**(US$)
            
            (US$)Property,
              Plant and Equipment
            
            $
            398,000
            
            $
            535,000




As
      of
      March 31, 2006, our property, plant & equipment were carried at US$398,000,
      which decreased by US$137,000 compared to 2005.





Detailed
      information on Property, Plant and Equipment is as follows:





**MARCH
                31**
            ********
            ****
            **2006**
            ****
            **2005**(US$)
            
            (US$)CostLeasehold
              improvements
            
            
            -
            
            
            124Machinery
            
            
            205
            
            
            199Office
              equipment
            
            
            361
            
            
            346Motor
              vehicles
            
            
            95
            
            
            92Total
            
            
            661
            
            
            761Accumulated
              depreciationLeasehold
              improvements
            
            
            -
            
            
            85Machinery
            
            
            68
            
            
            31Office
              equipment
            
            
            162
            
            
            95Motor
              vehicles
            
            
            33
            
            
            15Total
            
            
            263
            
            
            226Carrying
              valueLeasehold
              improvements
            
            
            -
            
            
            39Machinery
            
            
            137
            
            
            168Office
              equipment
            
            
            199
            
            
            251Motor
              vehicles
            
            
            62
            
            
            77Total
            
            
            398
            
            
            535




**Liabilities**




**Fiscal
                year
                ended****2006**
            
            **2005**(US$)
            
            (US$)Liabilities
            
            
            11,085,000
            
            
            7,377,000




Our
      total
      liabilities as of March 31, 2006 were US$11,085,000, which consisted of
      US$7,521,000 in current liabilities and US$3,564,000 in long-term liabilities.


18


Long
      term
      liabilities amounted to US$3,564,000 as of March 31, 2006, all of which were
      liabilities due to shareholders.





**Capital
      Resources**





Before
      the acquisition of Wise Target and Amber Link which gave us a 95% interest
      in
      Shanghai Sunplus Communication Co. Ltd., we had no operations and relied on
      advances from officers and directors to fund our basic administration. We
      currently have on-going operations and believe we have sufficient capital to
      continue operations for the next twelve months. We do not anticipate the need
      for additional capital at this time. However, should we require additional
      capital; we may take additional advances or loans from officers, sell equity
      or
      find other forms of financing.





**Research
      and Development**





During
      the two years ended March 31, 2006 and 2005, research and development costs
      amounting to US$176,000 and US$73,000 respectively, were charged to operations
      and are included in cost of revenue.





**RISK
      FACTORS**





Set
      forth
      below is a description of factors that may affect our business, results of
      operations and share price from time to time.





***Our
      sales and profitability depend on the continued growth of the mobile
      communications industry as well as the growth of the new market segments within
      that industry in which we have recently invested. If the mobile communications
      industry does not grow as we expect, or if the new market segments on which
      we
      have chosen to focus and in which we have recently invested grow less than
      expected, or if new faster-growing market segments emerge in which we have
      not
      invested, our sales and profitability may be adversely
      affected.***





Our
      business depends on continued growth in mobile communications in terms of the
      number of existing mobile subscribers who upgrade or simply replace their
      existing mobile devices, the number of new subscribers and increased usage.
      As
      well, our sales and profitability are affected by the extent to which there
      is
      increasing demand for, and development of, value-added services, leading to
      opportunities for us to successfully market mobile devices that feature these
      services. These developments in our industry are to a certain extent outside
      of
      our control. For example, we are dependent on operators in highly penetrated
      markets to successfully introduce services that cause a substantial increase
      in
      usage of voice and data. Further, in order to support a continued increase
      in
      mobile subscribers in certain low-penetration markets, we are dependent on
      operators to increase their sales volumes of lower-cost mobile devices and
      to
      offer affordable tariffs. If operators are not successful in their attempts
      to
      increase subscriber numbers, stimulate increased usage or drive replacement
      sales, our business and results of operations could be materially adversely
      affected.





Our
      industry continues to undergo significant changes. First, the mobile
      communications, information technology, media and consumer electronics
      industries are converging in some areas into one broader industry leading to
      the
      creation of new mobile devices, services and ways to use mobile devices. Second,
      while participants in the mobile communications industry once provided complete
      products and solutions, industry players are increasingly providing specific
      hardware and software layers for products and solutions. As a result of these
      changes, new market segments within our industry have begun to emerge and we
      have made significant investments in new business opportunities in certain
      of
      these market segments, such as smartphones, imaging, games, music and enterprise
      mobility infrastructure. However, a number of the new market segments in the
      mobile communications industry are still in early states of their development,
      and it may be difficult for us to accurately predict which new market segments
      are the most advantageous for us to focus on. As a result, if the segments
      on
      which we have chosen to focus grow less than expected, we may not receive a
      return on our investment as soon as we expect, or at all. We may also forego
      growth opportunities in new market segments of the mobile communications
      industry on which we do not focus.


19




***Our
      results of operations, particularly our profitability, may be adversely affected
      if we do not successfully manage price erosion related to our
      products.***





In
      the
      future, if, for competitive reasons, we need to lower the selling prices of
      certain of our products and if we cannot lower our costs at the same rate or
      faster, this may have a material adverse effect on our business and results
      of
      operations, particularly our profitability. To mitigate the impact of mix shifts
      on our profitability, we implement product segmentation with the aim of
      designing appropriate features with an appropriate cost basis for each customer
      segment. Likewise, we endeavor to mitigate the impact on our profitability
      of
      price erosion of certain features and functionalities by seeking to correctly
      time the introduction of new products, in order to align such introductions
      with
      declines in the prices of relevant components. We cannot predict with any
      certainty whether or to what extent we may need to lower prices for competitive
      reasons again and how successful we will be in aligning our cost basis to the
      pricing at any given point in time. Price erosion is a normal characteristic
      of
      the mobile devices industry, and the products and solutions offered by us are
      also subject to natural price erosion over time. If we cannot reduce our costs
      at the same rate, our business may be materially adversely affected.





***We
      must develop or otherwise acquire complex, evolving technologies to use in
      our
      business. If we fail to develop these technologies or to successfully
      commercialize them as new advanced products and solutions that meet customer
      demand, or fail to do so on a timely basis, it may have a material adverse
      effect on our business, our ability to meet our targets and our results of
      operations.***





In
      order
      to succeed in our markets, we believe that we must develop or otherwise acquire
      complex, evolving technologies to use in our business. However, the development
      and use of new technologies, applications and technology platforms for our
      mobile devices involves time, substantial costs and risks both within and
      outside of our control. This is true whether we develop these technologies
      internally, by acquiring or investing in other companies or through
      collaboration with third parties.





The
      technologies, functionalities and features on which we choose to focus may
      not
      achieve as broad or timely customer acceptance as we expect. This may result
      from numerous factors including the availability of more attractive alternatives
      or a lack of sufficient compatibility with other existing technologies, products
      and solutions. Additionally, even if we do select the technologies,
      functionalities and features that customers ultimately want, we or the companies
      that work with us may not be able to bring them to the market at the right
      time.





Furthermore,
      as a result of ongoing technological developments, our products and solutions
      are increasingly used together with components or layers that have been
      developed by third parties, whether or not we have authorized their use with
      our
      products and solutions. However, such components, such as batteries, or layers,
      such as software applications, may not be compatible with our products and
      solutions and may not meet our and our customers' quality, safety or other
      standards. As well, certain components or layers that may be used with our
      products may enable our products and solutions to be used for objectionable
      purposes, such as to transfer content that might be hateful or derogatory.
      The
      use of our products and solutions with incompatible or otherwise substandard
      components or layers, or for purposes that are inappropriate, is largely outside
      of our control and could harm our reputation in the industry.





***We
      need to understand the different markets in which we operate and meet the needs
      of our customers, which include mobile network operators, distributors,
      independent retailers and enterprise customers. We need to have a competitive
      product portfolio, and to work together with our operator customers to address
      their needs. Our failure to identify key market trends and to respond timely
      and
      successfully to the needs of our customers may have a material adverse impact
      on
      our market share, business and results of operations.***


20




We
      serve
      a diverse range of customers, ranging from mobile network operators,
      distributors, independent retailers to enterprise customers, across a variety
      of
      markets. In many of these markets, the mobile communications industry is at
      different stages of development, and many of these markets have different
      characteristics and dynamics, for example, in terms of mobile penetration rates
      and technology, feature and pricing preferences. Establishing and maintaining
      good relationships with our customers and understanding trends and needs in
      their markets require us to constantly obtain and evaluate a complex array
      of
      feedback and other data. We must do this efficiently in order to be able to
      identify key market trends and address our customers' needs proactively and
      in a
      timely manner. If we fail to analyze correctly and respond timely and
      appropriately to customer feedback and other data, our business may be
      materially adversely affected.





Certain
      mobile network operators require mobile devices to be customized to their
      specifications, by requesting certain preferred features, functionalities or
      design, together with co-branding with the network operator's brand. We believe
      that customization is an important element in gaining increased operator
      customer satisfaction and we are working together with operators on product
      planning as well as accelerating product hardware and software customization
      programs. These developments may result in new challenges as we provide
      customized products, such as the need for us to produce mobile devices in
      smaller lot sizes, which can impede our economies of scale, or the potential
      for
      the erosion of the Sunplus brand, which we consider to be one of our key
      competitive advantages.





In
      order
      to meet our customers' needs, we need to introduce new devices on a timely
      basis
      and maintain a competitive product portfolio. For us, a competitive product
      portfolio means a broad and balanced offering of commercially appealing mobile
      devices with attractive features, functionality and design for all major user
      segments and price points. If we do not achieve a competitive portfolio, we
      believe that we will be at a competitive disadvantage, which may lead to lower
      revenue and lower profits.




The
      competitiveness of our portfolio is also influenced by the value of the Sunplus
      brand. A number of factors, including actual or even alleged defects in our
      products and solutions, may have a negative effect on our reputation and erode
      the value of the Sunplus brand.





***Competition
      in our industry is intense. Our failure to respond successfully to changes
      in
      the competitive landscape may have a material adverse impact on our business
      and
      results of operations.***





The
      markets for our products and solutions are intensely competitive. Industry
      participants compete with each other mainly on the basis of the breadth and
      depth of their product portfolios, price, operational and manufacturing
      efficiency, technical performance, product features, quality, customer support
      and brand recognition. We are facing increased competition from both our
      traditional competitors in the mobile communications industry as well as a
      number of new competitors, particularly from countries where production costs
      tend to be lower. Some of these competitors have used, and we expect will
      continue to use, more aggressive pricing strategies, different design approaches
      and alternative technologies than ours. In addition, some competitors have
      chosen a strategy of focusing on productization based on commercially available
      technologies and components, which may enable them to introduce products faster
      and with lower levels of research and development spending than our
      company.




As
      a
      result of developments in our industry, we also expect to face new competition
      from companies in related industries, such as consumer electronics manufacturers
      and business device and solution providers, including but not limited to Dell,
      HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally,
      because mobile network operators are increasingly offering mobile devices under
      their own brand, we face increasing competition from non-branded mobile device
      manufacturers. If we cannot respond successfully to these competitive
      developments, our business and results of operations may be materially adversely
      affected.


21




***Reaching
      our sales, profitability, volume and market share targets depends on numerous
      factors. These include our ability to offer products and solutions that meet
      the
      demands of the market and to manage the prices and costs of our products and
      solutions, our operational efficiency, the pace of development and acceptance
      of
      new technologies, our success in the business areas that we have recently
      entered, and general economic conditions. Depending on those factors, some
      of
      which we may influence and others of which are beyond our control, we may fail
      to reach our targets and we may fail to provide accurate forecasts of our sales
      and results of operations*** *.*





A
      variety
      of factors discussed throughout these Risk Factors could affect our ability
      to
      reach our targets and give accurate forecasts. Although, we can influence some
      of these factors, some of them depend on external factors that are beyond our
      control. In our mobile device businesses, we seek to maintain healthy levels
      of
      sales and profitability through offering a competitive portfolio of mobile
      devices, growing faster than the market, working to improve our operational
      efficiency, controlling our costs, and targeting timely and successful
      product introductions and shipments. The quarterly and annual sales and
      operating results in our mobile device businesses also depend on a number of
      other factors that are not within our control. Such factors include the global
      growth in mobile device volumes, which is influenced by, among other factors,
      regional economic factors, competitive pressures, regulatory environment, the
      timing and success of product and service introductions by various market
      participants, including network operators, the commercial acceptance of new
      mobile devices, technologies and services, and operators' and distributors'
      financial situations. Our sales and operating results are also impacted by
      fluctuations in exchange rates and at the quarterly level by seasonality. In
      developing markets, the availability and cost, through affordable tariffs,
      of
      mobile phone service compared with the availability and cost of fixed line
      networks may also impact volume growth.





In
      our
      mobile networks business, we also seek to maintain healthy levels of sales
      and
      profitability and try to grow faster than the market. Our networks business's
      quarterly and annual net sales and operating results can be affected by a number
      of factors, some of which we can influence, such as our operational efficiency,
      the level of our research and development investments and the deployment
      progress and technical success we achieve under network contracts. Other
      relevant factors include operator investment behavior, which can vary
      significantly from quarter to quarter, competitive pressures and general
      economic conditions although these are not within our control.





The
      new
      business areas that we have entered may be less profitable than we currently
      foresee, or they may generate more variable operating results than we currently
      foresee. We expect to incur short-term operating losses in certain of these
      new
      business areas given our early stage investments in research and development
      and
      marketing in particular. Also our efforts in managing prices and costs in the
      long-term, especially balancing prices and volumes with research and development
      costs, may prove to be inadequate.





Although
      we may announce forecasts of our results of operations, uncertainties affecting
      any of these factors, particularly during difficult economic conditions, render
      our forecasts difficult to make, and may cause us not to reach the targets
      that
      we have forecasted, or to revise our estimates.





***Our
      sales and results of operations could be adversely affected if we fail to
      efficiently manage our manufacturing and logistics without interruption, or
      fail
      to ensure that our products and solutions meet our and our customers' quality,
      safety and other requirements and are delivered in
      time.***





Our
      manufacturing and logistics are complex, require advanced and costly equipment
      and include outsourcing to third parties. These operations are continuously
      modified in an effort to improve manufacturing efficiency and flexibility.
      We
      may experience difficulties in adapting our supply to the demand for our
      products, ramping up or down production at our facilities, adopting new
      manufacturing processes, finding the most timely way to develop the best
      technical solutions for new products, or achieving manufacturing efficiency
      and
      flexibility, whether we manufacture our products and solutions ourselves or
      outsource to third parties. Such difficulties may have a material adverse effect
      on our sales and results of operations and may result from, among other things:
      delays in adjusting or upgrading production at our facilities, delays in
      expanding production capacity, failure in our manufacturing and logistics
      processes, failures in the activities we have outsourced, and interruptions
      in
      the data communication systems that run our operations. Also, a failure or
      an
      interruption could occur at any stage of our product creation, manufacturing
      and
      delivery processes, resulting in our products and solutions not meeting our
      and
      our customers' quality, safety and other requirements, or being delivered late,
      which could have a material adverse effect on our sales, our results of
      operations and reputation and the value of the Sunplus brand.


22


***We
      depend on our suppliers for the timely delivery of components and for their
      compliance with our supplier requirements, such as, most notably, our and our
      customers' product quality, safety and other standards. Their failure to do
      so
      could adversely affect our ability to deliver our products and solutions
      successfully and on time.***





Our
      manufacturing operations depend to a certain extent on obtaining adequate
      supplies of fully functional components on a timely basis. Our principal supply
      requirements are for electronic components, mechanical components and software,
      which all have a wide range of applications in our products. Electronic
      components include integrated circuits, microprocessors, standard components,
      memory devices, cameras, displays, batteries and chargers while mechanical
      components include covers, connectors, key mats and antennas. In addition,
      a
      particular component may be available only from a limited number of suppliers.
      Suppliers may from time to time extend lead times, limit supplies or increase
      prices due to capacity constraints or other factors, which could adversely
      affect our ability to deliver our products and solutions on a timely basis.
      Moreover, even if we attempt to select our suppliers and manage our supplier
      relationships with scrutiny, a component supplier may fail to meet our supplier
      requirements, such as, most notably, our and our customers' product quality,
      safety and other standards, and consequently some of our products are
      unacceptable to us and our customers, or we may fail in our own quality
      controls. Moreover, a component supplier may experience delays or disruption
      to
      its manufacturing, or financial difficulties. Any of these events could delay
      our successful delivery of products and solutions, which meet our and our
      customers' quality, safety and other requirements, or otherwise adversely affect
      our sales and our results of operations. Also, our reputation and brand value
      may be affected due to real or merely alleged failures in our products and
      solutions.





***We
      are developing a number of our new products and solutions together with other
      companies. If any of these companies were to fail to perform, we may not be
      able
      to bring our products and solutions to market successfully or in a timely way
      and this could have a material adverse impact on our sales and
      profitability.***





We
      continue to invite the providers of technology, components or software to work
      with us to develop technologies or new products and solutions. These
      arrangements involve the commitment by each company of various resources,
      including technology, research and development efforts, and personnel. Although
      the target of these arrangements is a mutually beneficial outcome for each
      party, our ability to introduce new products and solutions that meet our and
      our
      customers' quality, safety and other standards successfully and on schedule
      could be hampered if, for example, any of the following risks were to
      materialize: the arrangements with the companies that work with us do not
      develop as expected, the technologies provided by the companies that work with
      us are not sufficiently protected or infringe third parties' intellectual
      property rights in a way that we cannot foresee or prevent, the technologies,
      products or solutions supplied by the companies that work with us do not meet
      the required quality, safety and other standards or customer needs, our own
      quality controls fail, or the financial standing of the companies that work
      with
      us deteriorates.





***Our
      operations rely on complex and highly centralized information technology systems
      and networks. If any system or network disruption occurs, this reliance could
      have a material adverse impact on our operations, sales and operating
      results.***





Our
      operations rely to a significant degree on the efficient and uninterrupted
      operation of complex and highly centralized information technology systems
      and
      networks, which are integrated with those of third parties. Any failure or
      disruption of our current or future systems or networks could have a material
      adverse effect on our operations, sales and operating results. Furthermore,
      any
      data leakages resulting from information technology security breaches could
      also
      adversely affect us.





All
      information technology systems are potentially vulnerable to damage or
      interruption from a variety of sources. We pursue various measures in order
      to
      manage our risks related to system and network disruptions, including the use
      of
      multiple suppliers and available information technology security. However,
      despite precautions taken by us, an outage in a telecommunications network
      utilized by any of our information technology systems, virus or other event
      that
      leads to an unanticipated interruption of our information technology systems
      or
      networks could have a material adverse effect on our operations, sales and
      operating results.


23


***Our
      products and solutions include increasingly complex technology involving
      numerous new proprietary technologies, as well as some developed or licensed
      to
      us by certain third parties. As a consequence, evaluating the protection of
      the
      technologies we intend to use is more and more challenging, and we expect
      increasingly to face claims that we have infringed third parties' intellectual
      property rights. The use of increasingly complex technology may also result
      in
      increased licensing costs for us, restrictions on our ability to use certain
      technologies in our products and solution offerings, and/or costly and
      time-consuming litigation. Third parties may also commence actions seeking
      to
      establish the invalidity of intellectual property rights on which we
      depend.***





Our
      products and solutions include increasingly complex technology involving
      numerous new proprietary technologies, as well as some developed or licensed
      to
      us by certain third parties. As the amount of such proprietary technologies
      needed for our products and solutions continues to increase, the number of
      parties claiming rights continues to increase and become more fragmented within
      individual products, and as the complexity of the technology and the overlap
      of
      product functionalities increases, the possibility of more infringement and
      related intellectual property claims against us also continues to increase.
      The
      holders of patents potentially relevant to our product and solution offerings
      may be unknown to us, or may otherwise make it difficult for us to acquire
      a
      license on commercially acceptable terms. There may also be technologies
      licensed to and relied on by us that are subject to infringement or other
      corresponding allegations or claims by others which could damage our ability
      to
      rely on such technologies.





In
      addition, although we endeavor to ensure that companies that work with us
      possess appropriate intellectual property rights or licenses, we cannot fully
      avoid risks of intellectual property rights infringement created by suppliers
      of
      components and various layers in our products and solutions or by companies
      with
      which we work in cooperative research and development activities. Similarly,
      we
      and our customers may face claims of infringement in connection with our
      customers' use of our products and solutions. Finally, as all technology
      standards, including those used and relied on by us, include some intellectual
      property rights, we cannot fully avoid risks of a claim for infringement of
      such
      rights due to our reliance on such standards. We believe that the number of
      third parties declaring their intellectual property to be relevant to these
      standards is increasing, which may increase the likelihood that we will be
      subject to such claims in the future.





Any
      restrictions on our ability to sell our products and solutions due to expected
      or alleged infringements of third party intellectual property rights and any
      intellectual property rights claims, regardless of merit, could result in
      material losses of profits, costly litigation, the payment of damages and other
      compensation, the diversion of the attention of our personnel, product shipment
      delays or the need for us to develop non-infringing technology or to enter
      into
      royalty or licensing agreements. If we were unable to develop non-infringing
      technology, or if royalty or licensing agreements were not available on
      commercially acceptable terms, we could be precluded from making and selling
      the
      affected products and solutions. As new features are added to our products
      and
      solutions, we may need to acquire further licenses, including from new and sometimes
      unidentified owners of intellectual property. The cumulative costs of obtaining
      any necessary licenses are difficult to predict and may over time have a
      negative effect on our operating results.





In
      addition, other companies may commence actions seeking to establish the
      invalidity of our intellectual property, for example, patent rights. In the
      event that one or more of our patents are challenged, a court may invalidate
      the
      patent or determine that the patent is not enforceable, which could harm our
      competitive position. If any of our key patents are invalidated, or if the
      scope
      of the claims in any of these patents is limited by a court decision, we could
      be prevented from licensing the invalidated or limited portion of our
      intellectual property rights. Even if such a patent challenge is not successful,
      it could be expensive and time consuming, divert management attention from
      our
      business and harm our reputation. Any diminution of the protection that our
      own
      intellectual property rights enjoy could cause us to lose some of the benefits
      of our investments in R&D, which may have a negative effect on our results
      of operations.





***If
      we are unable to recruit, retain and develop appropriately skilled employees,
      we
      may not be able to implement our strategies and, consequently, our results
      of
      operations may suffer.***




24


We
      must
      continue to recruit, retain and through constant competence training develop
      appropriately skilled employees with a comprehensive understanding of our
      businesses and technologies. As competition for skilled personnel remains keen,
      we seek to create a corporate culture that encourages creativity and continuous
      learning. We are also continuously developing our compensation and benefit
      policies and taking other measures to attract and motivate skilled personnel.
      Nevertheless, we have encountered in the past, and may encounter in the future,
      shortages of appropriately skilled personnel, which may hamper our ability
      to
      implement our strategies and harm our results of operations.





***The
      global networks business relies on a limited number of customers and large
      multi-year contracts. Unfavorable developments under such a contract or in
      relation to a major customer may affect our sales, our results of operations
      and
      cash flow adversely.***





Large
      multi-year contracts, which are typical in the networks industry, include a
      risk
      that the timing of sales and results of operations associated with these
      contracts will be different than expected. Moreover, they usually require the
      dedication of substantial amounts of working capital and other resources, which
      impacts our cash flow negatively. Any non-performance by us under these
      contracts may have significant adverse consequences for us because network
      operators have demanded and may continue to demand stringent contract
      undertakings such as penalties for contract violations.





***Our
      sales derived from, and assets located in, emerging market countries may be
      adversely affected by economic, regulatory and political developments in those
      countries. As sales from these countries represent an increasing portion of
      our
      total sales, economic or political turmoil in these countries could adversely
      affect our sales and results of operations. Our investments in emerging market
      countries may also be subject to other risks and
      uncertainties.***





We
      generate sales from and have invested in various emerging market countries.
      As
      sales from these countries represent an increasing portion of our total sales,
      economic or political turmoil in these countries could adversely affect our
      sales and results of operations. Our investments in emerging market countries
      may also be subject to risks and uncertainties, including unfavorable taxation
      treatment, exchange controls, challenges in protecting our intellectual property
      rights, nationalization, inflation, incidents of terrorist activity, currency
      fluctuations, or the absence of, or unexpected changes in, regulation as well
      as
      other unforeseeable operational risks.





***Allegations
      of health risks from the electromagnetic fields generated by base stations
      and
      mobile devices, and the lawsuits and publicity relating to them, regardless
      of
      merit, could affect our operations negatively by leading consumers to reduce
      their use of mobile devices or by causing us to allocate monetary and personnel
      resources to these issues.***





There
      has
      been public speculation about possible health risks to individuals from exposure
      to electromagnetic fields from base stations and from the use of mobile devices.
      While a substantial amount of scientific research conducted to date by various
      independent research bodies has indicated that these radio signals, at levels
      within the limits prescribed by public health authority safety standards and
      recommendations, present no adverse effect to human health, we cannot
      be certain
      that future studies, irrespective of their scientific basis, will not suggest
      a
      link between electromagnetic fields and adverse health effects that would
      adversely affect our sales and share price. Research into these issues is
      ongoing by government agencies, international health organizations and other
      scientific bodies in order to develop a better scientific and public
      understanding of these issues.




Although
      Sunplus products and solutions are designed to meet all relevant safety
      standards and recommendations globally, no more than a perceived risk of adverse
      health effects of mobile communications devices could adversely affect us
      through a reduction in sales of mobile devices or increased difficulty in
      obtaining sites for base stations, and could have a negative effect on our
      reputation and brand value as well as harm our share price.




25


***Changes
      in various types of regulation in countries around the world could affect our
      business adversely.***





Our
      business is subject to direct and indirect regulation in each of the countries
      in which we, the companies with which we work or our customers do business.
      As a
      result, changes in various types of regulations applicable to current or new
      technologies, products or services could affect our business adversely. For
      example, it is in our interest that the Federal Communications Commission
      maintains a regulatory environment that ensures the continued growth of the
      wireless sector in the United States. In addition, changes in regulation
      affecting the construction of base stations and other network infrastructure
      could adversely affect the timing and costs of new network construction or
      expansion and the commercial launch and ultimate commercial success of these
      networks.




Moreover,
      the implementation of new technological or legal requirements, such as the
      requirement in the United States that all handsets must be able to indicate
      their physical location, could impact our products and solutions, manufacturing
      or distribution processes, and could affect the timing of product and solution
      introductions, the cost of our production, products or solutions as well as
      their commercial success. Finally, export control, tariff, environmental, safety
      and other regulation that adversely affects the pricing or costs of our products
      and solutions as well as new services related to our products could affect
      our
      net sales and results of operations. The impact of these changes in regulation
      could affect our business adversely even though the specific regulations do
      not
      always directly apply to us or our products and solutions.





**Item
      7.**  **Financial
      Statements.**





The
      financial statements of the Company appear at Page F-1.





**Item
      8.**  **Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





None.





**Item
      8A. Controls and Procedures.**





(a)  Evaluation
      of Disclosure Controls and Procedures. The Company's management, with the
      participation of the chief executive officer and the chief financial officer,
      carried out an evaluation of the effectiveness of the Company's "disclosure,
      controls and procedures" (as defined in the Securities Exchange Act of 1934
      (the
      "Exchange Act") Rules 13a-15(e) and 15-d-15(e) as of the end of the period
      covered by this annual report (the "Evaluation Date"). Based upon that
      evaluation, the chief executive officer and the chief financial officer
      concluded that, as of the Evaluation Date, the Company's disclosure, controls
      and procedures are effective, providing them with material information relating
      to the Company as required to be disclosed in the reports the Company files
      or
      submits under the Exchange Act on a timely basis.





(b)  Changes
      in Internal Control over Financial Reporting. There were no changes in the
      Company's internal controls over financial reporting, known to the chief
      executive officer or the chief financial officer, that occurred during the
      period covered by this report that has materially affected, or is reasonably
      likely to materially affect, the Company's internal control over financial
      reporting.




**Item
      8B. Other Information**




There
      are
      no further disclosures. No information was required to be disclosed in a Form
      8-K during the fourth quarter 2006.


26




**PART
      III**





**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons; Compliance With Section**  **16(a)
      of the Exchange Act.**





The
      following table sets forth the name, age, position and office term of each
      executive officer and director of the Company.





**Name**
            **Age**
            **Positions**
            **Since**Xiaofeng
                Li
            29
            Director
                and Chief Executive Officer
            August
                2005Meilian
                Li
            34
            Chairman
                of the Board
            August
                2005Zhaohui
                Luo
            37
            Director
            August
                2005Murry
                Zuhe Xiao
            38
            Chief
                Financial Officer
            August
                2005Eric
                Xue
            31
            Chief
                Technical Officer
            August
                2005




The
      following is a brief summary of the business experience of our
      management.





**Mr.
      Xiaofeng Li, Director and Chief Executive Officer, 29 years
      old.** Mr. Li
      holds a Bachelor Degree from Shanghai University, Industrial Design Department.
      From August 1998 to February 2001, Mr. Li was employed by Inventec Appliances
      Corp. where he was an Industrial Designer. From 2001 to March 2002, Mr. Li was
      employed by Shanghai Fanna Industrial Product Design Co., Ltd. as executive
      director and general manager. Since April 2002, Mr. Li has been Chairman of
      the
      Board of Shanghai Sunplus Communication Technology Co., Ltd.





**Mr.
      Murry Zuhe Xiao, Chief Financial Officer, 38 years old.** Mr. Xiao
      is a Fellow Member of the Institute of Financial Accountant Association, a
      member of the Society of Registered Financial Planners, and a Member of China
      Institute of Certified Public Accountants. Mr. Xiao holds a post graduate
      Certificate in Professional Accounting from City University, Hong Kong. He
      also
      holds a degree in Economics from the Jiang Xi University of Finance and
      Economics. Since 1999, Mr. Xiao had worked for Qiao Xing Universal Telephone,
      Inc. as Finance Manager for about 4 years Mr. Xiao joined our Company in 2005.





**Ms.
      Meilian Li, Chairman of the Board, 34 years old.** Ms.
      Li
      holds a Bachelor Degree in Accounting from Guangzhou Nanyang College. From
      2000
      to the present, Ms. Li has held the position of Board Chairman of Shenzhen
      Youlian Transportation, Inc. where she is responsible for human resource
      management, strategic planning and financial management.





**Mr.
      Zhaohui Luo, Director, 37 years old.** Mr. Luo
      holds a Masters of Business Administration from East China Normal University.
      From 1993 to 2002, Mr. Luo was director and general manager of Huizhou Ganghui
      Electronic Engineering System Co., Ltd. He serves as a General Manger for
      Guangdong Consun Group, Shanghai Office since 2002.





**Mr.
      Eric Xue, Chief Technical Officer, 31 years old** .
      Mr.
      Eric Xue served as Chief Technical Officer of Sunplus since 2003 in charge
      of
      research and development of hardware and software. Mr. Xue worked as Section
      Manager in Motorola Electronics In Shanghai from 2000 until 2002. He previously
      worked at Inventic Application, Inc. as an electrical engineer. Mr. Xue holds
      a
      Bachelor degree of Electronic and Communication Systems from Huadong Shifan
      University.


The
      Company has no audit committee financial expert, as defined under Section
      228.401, serving on its audit committee because it has no audit committee and
      is
      not required to have an audit committee because it is not a listed security
      as
      defined in Section 240.10A-3.





**Compliance
      with Section 16**





Section
      16(a) of the Securities Exchange Act of 1934 requires officers and directors
      of
      the Company and persons who own more than ten percent of a registered class
      of
      its equity securities to file reports of ownership and changes in their
      ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission,
      and
      forward copies of such filings to the Company. Based on the copies of filings
      received by the Company during the most recent fiscal year the directors,
      officers, and beneficial owners of more than ten percent of the equity
      securities of the Company registered pursuant to Section 12 of the Exchange
      Act
      have filed on a timely basis all required Forms 3, 4, and 5 and any amendments
      thereto.




27


**Code
      of Ethics**





We
      have
      recently adopted a Code of Ethics and Business Conduct authorizing the
      establishment of a committee to ensure that our disclosure controls and
      procedures remain effective.  Our Code also defines the standard of conduct
      expected by our officers, directors and employees.  The Code was filed as
      an exhibit to our Form 10-KSB for the fiscal year end 2003 and is incorporated
      herein by reference.





**Item
      10. Executive Compensation.**





**SUMMARY
      COMPENSATION TABLE**





**Long
                Term Compensation****Annual
                Compensation**
            **Awards**
            **Payouts****Name
                and**
              **Principal
                Position**
            **Year**
              **Ended**
            **Salary**
              **($)**
            **Bonus**
              **($)**
            **Other
                Annual**
              **Compen****sation**
              **($)**
            **Restricted
                Stock Awards**
              **($)**
            **Securities
                Underlying Options/****SARs**
              **(#)**
            **LTIP
                Payouts**
              **($)**
            **All
                Other**
              **Compen****sation**
              **($)**Larry
                Eastland,(1)President
            2004
              2003
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-Tianpei
                Li(2)
              President
            2005
            -0-
            -0-
            -0-
            -0-
            -0-
            -0-
            -0-Silu
                Wu(2)
              CFO
            2005
            -0-
            -0-
            -0-
            -0-
            -0-
            -0-
            -0-Xiaofeng
                Li
              CEO
            2006
            30,811
            -0-
            3,958
            -0-
            -0-
            -0-
            -0-Murry
                Zuhe Xiao, CFO
            2006
            23,126
            -0-
            -0-
            -0-
            -0-
            -0-
            -0-





(1)
      Resigned in November 2004


(2)
      Resigned in August 2005





**Compensation
      Plans**





We
      do not
      currently have any written compensation plans for any of our
      employees.





**Compensation
      of Board Members**





Although
      we do not have a written compensation plan, Board members generally do not
      receive any remuneration for service on the Board.


28




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth as of July 12, 2006, the name and shareholdings
      of
      each person known to us that either directly or beneficially holds more than
      5%
      of our 30,088,174 issued and outstanding shares of common stock, par value
      $.001. The table also lists the name and shareholdings of each director and
      of
      all officers and directors as a group. Except as otherwise indicated, the
      persons named in the table have sole voting and dispositive power with respect
      to all shares beneficially owned, subject to community property laws where
      applicable.




**Name
                and Address**
            **Title
                of Class**
            **Number
                of Shares Beneficially Owned**
            **%
                of Shares**Li,
                Xiaofeng (1) (2)
              18thFloor YongSheng Building
              XhongShang
                XI Road
              Xuhui
                District, Shanghai, China
            Common
            2,600,000
            8.64%Li,
                Meilian (1)
              18thFloor YongSheng Building
              XhongShang
                XI Road
              Xuhui
                District, Shanghai, China
            Common
            15,950,000
            53.01%Luo,
                Zhaohui (1)
              18thFloor YongSheng Building
              XhongShang
                XI Road
              Xuhui
                District, Shanghai, China
            Common
            -0-
            -0-Xiao,
                Murry Zuhe (2)
              18thFloor YongSheng Building
              XhongShang
                XI Road
              Xuhui
                District, Shanghai, China
            Common
            -0-
            -0-Xue,
                Eric (2)
              18thFloor YongSheng Building
              XhongShang
                XI Road
              Xuhui
                District, Shanghai, China
            Common
            -0-
            -0-Officers
                and Directors as a group
              5
                People
            Common
            18,550,000
            61.65%





(1)
      Director.


(2)
      Officer


29




**Item
      12. Certain Relationships and Related Transactions.**





The
      company advanced US$9,000 to Mr.Li Xiaofeng, a director and our Chief Executive
      Officer for business trip expenses which was recorded as a receivable as at
      March 31, 2006. These advances were subsequently settled and recorded as
      expenses for the next fiscal year. We owed Mr. Li US$773,000 which is recorded
      as a long term liability.





The
      Company advanced US$6,000 to Eric Yue, our Chief Technical Officer for business
      trip expenses which was recorded as a receivable as at March 31, 2006. The
      amount was subsequently settled and recorded as expenses in the next fiscal
      year.





Li
      Meilian, Chairman of the Board and a shareholder is owed US$2,791,000 which
      is
      recorded as a long term liability.





LEA
      Management Group, LLC, a shareholder, is owed US$25,000 for service fees which
      was recorded as other payables. We also paid LEA Management US$58,000 in service
      fees for the year ended March 31, 2006.





**Item
      13. Exhibits.**




**Exhibit
                Number**
            **Title**
            **Location**14
            Code of
              Ethics
            10-KSB filed
              6/2/0431.1
            Certification
              of
              the Principal Executive Officer pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002
            Attached31.2
            Certification
              of the Principal Financial Officer pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002
            Attached32.1
            Certification
                of the Principal Executive Officer
                pursuant to U.S.C. Section 1350 as adopted pursuant to
              Section
                906 of the Sarbanes-Oxley Act of 2002*
            Attached32.2
            Certification
                of the Principal Financial Officer
                pursuant to U.S.C. Section 1350 as adopted pursuant to
              Section
                906 of the Sarbanes-Oxley Act of 2002*
            Attached





***** The
      Exhibit attached to this Form 10-KSB shall not be deemed "filed" for purposes
      of
      Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or
      otherwise subject to liability under that section, nor shall it be deemed
      incorporated by reference in any filing under the Securities Act of 1933, as
      amended, or the Exchange Act, except as expressly set forth by specific
      reference in such filing.





**Item
      14. Principal Accountant Fees and Services.**





Audit
      Fee





The
      aggregate fees billed for each of the last two fiscal years for professional
      services rendered by the principal account for the audit of T-BAY Holdings,
      Inc.’s annual financial statement and review of financial statements included in
      T-BAY Holdings, Inc.’s 10-QSB reports and services normally provided by the
      accountant in connection with statutory and regulatory filings or engagements
      were $nil for fiscal year ended 2005 and US$104,000 for fiscal year ended
      2006.


30


Audit-Related
      Fees





The
      aggregate fees billed in each of the last two fiscal years for assurance and
      related services by the principal accountant that are reasonably related to
      the
      performance of the audit or review of T-Bay’s financial statements that are not
      reported above were $nil for fiscal year ended 2005 and $nil for fiscal year
      ended 2006 and consisted of management of records.





Tax
      Fees





The
      aggregate fees billed in each of the last two fiscal years for professional
      services rendered by the principal accountant for tax compliance, tax advise,
      and tax planning were $nil for fiscal year ended March 31, 2005 and consisted
      of
      accounting and $nil for fiscal year ended March 31, 2006 and consisted of
      accounting.





All
      Other Fees





There
      were no other aggregate fees billed in either of the last two fiscal years
      for
      products and services provided by the principal accountant, other than the
      services reported above.




We
      do not
      have an audit committee currently serving and as a result, our board of
      directors performs the duties of an audit committee. Our board of directors
      will
      evaluate and approve in advance, the scope and cost of the engagement of an
      auditor before the auditor renders audit and non-audit services. We do not
      rely
      on pre-approval policies and procedures.





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.








Date: July 13, 2006
            By: /s/ Xiaofeng LiXiaofeng
              Li, Chief Executive OfficerDate: July 13, 2006
            By:
              /s/ Murry Zuhe XiaoMurry Zuhe Xiao, Chief Financial
              Officer





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.








Date: July 13, 2006
            By: /s/ Meilian LiMeilian
              Li, Chairman of the Board of DirectorsDate: July 13, 2006
            By:
              /s/ Xiaofeng LiXiaofeng
              Li, DirectorDate: July 13, 2006
            By:
              /s/ Zhaohui LuoZhaohui
              Luo, Director





31


**T-BAY
        HOLDINGS, INC.**
 **AND
        SUBSIDIARIES**
 
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **MARCH
        31, 2006**
 **Together
        With Report Of**
 **Independent
        Registered Public Accounting Firm**
 
 
 
  
 
 **T-BAY
          HOLDINGS,** **INC. AND SUBSIDIARIES**
 **INDEX
          TO CONSOLIDATED FINANCIAL STATEMENTS**
   Report
                  of Independent Registered Public Accounting Firm
                F-2Consolidated Balance Sheet
                F-3Consolidated Statements of
                  Operations
                F-4Consolidated Statement of Changes
                  in
                  Stockholders’ Equity
                F-5Consolidated Statements of Cash
                  Flows
                F-6Notes to Consolidated Financial
                  Statements
                F-7
 F-1
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 The
        Board
        of Directors and Stockholders of
 T-Bay
        Holdings, Inc.
 
 
 We
        have
        audited the accompanying consolidated balance sheet of T-Bay Holdings, Inc.
        and
        subsidiaries (the “Company”) as of March 31, 2006, and the related consolidated
        statements of operations, stockholder’s equity, and cash flows for each of the
        two years in the period then ended. These consolidated financial statements
        are
        the responsibility of the Company’s management. Our responsibility is to express
        an opinion on these consolidated financial statements based on our audits.
 
 We
        conducted our audits in accordance with the
        standards of the Public Company Accounting Oversight Board (United States).
        Those standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the consolidated financial statements are free of
        material misstatement. An audit includes examining, on a test basis, evidence
        supporting the amounts and disclosures in the consolidated financial statements.
        An audit also includes assessing the accounting principles used and significant
        estimates made by management, as well as evaluating the overall financial
        statement presentation. We believe that our audits provide a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of the Company
        as
        of March 31, 2006 and the results of its operations and cash flows for each
        of
        the two years in the period then ended in conformity with accounting principles
        generally accepted in the United States of America.
 
 
 
 
 
 By:
        /s/ Moore StephensMoore Stephens
 *Certified
        Public Accountants*
 *Hong
        Kong*
 
 May
        23,
        2006
  F-2
  **T-BAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **March
        31, 2006**
 **(In
        thousand of United States dollars)**
  **MARCH
                  31, 2006****ASSETS**
              
              
              Note(s)CURRENT
                  ASSETSCash
                  and cash equivalents
              
              
              
              
              $
              4,673Notes
                  receivables
              
              
              
              
              
              7,759Accounts
                  receivable, net
              
              
              3
              
              
              14,600Prepayments,
                  deposits and other receivables, netRelated
                  parties
              
              
              11
              
              
              15Third
                  parties
              
              
              
              
              
              542Value
                  Added Tax (“VAT”) recoverable
              
              
              
              
              
              19Inventories
              
              
              4
              
              
              1,982Total
                  current assets
              
              
              
              
              
              29,590PROPERTY,
                  PLANT AND EQUIPMENT, NET
              
              
              5
              
              
              398INTANGIBLE
                  ASSETS, NET
              
              
              6
              
              
              41**TOTAL
                  ASSETS**
              
              
              
              
              $
              30,029**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable
              
              
              
              
              $
              2,493Accruals
                  and other payablesRelated
                  parties
              
              
              11
              
              
              25Third
                  parties
              
              
              
              
              
              1,620Receipts
                  in advance
              
              
              
              
              
              1,450Income
                  tax payable
              
              
              
              
              
              1,933Total
                  current liabilities
              
              
              
              
              
              7,521LONG-TERM
                  LIABILITIESDue
                  to shareholders
              
              
              11
              
              
              3,564Total
                  liabilities
              
              
              
              
              
              11,085MINORITY
                  INTERESTS
              
              
              
              
              
              1,107COMMITMENTS
                  AND CONTINGENCIES
              
              
              12STOCKHOLDERS’
                  EQUITYPreferred
                  stock, authorized 10,000,000 shares, par value
                $0.001,
                  issued and outstanding Nil
              
              
              2(p)Common
                  stock, authorized 100,000,000 shares, par value $0.001, issued
                  and
                  outstanding 30,088,174
              
              
              
              
              
              30Additional
                  paid-in capital
              
              
              
              
              
              1,462Public
                  welfare fund
              
              
              
              
              
              809Statutory
                  surplus fund
              
              
              
              
              
              1,617Retained
                  earnings
              
              
              
              
              
              13,503Accumulated
                  other comprehensive income
              
              
              
              
              
              416Total
                  stockholders’ equity
              
              
              
              
              
              17,837**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY**
              
              
              
              
              $
              30,029
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-3
  **T-BAY
        HOLDINGS, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
        the years ended March 31, 2006 and 2005**
 **(In
        thousand of United States dollars, except per share data)**
 
 **YEAR
                  ENDED MARCH 31,**
              ********
              ****
              ****
              ****
              **2006**
              ****
              **2005**NET
                  REVENUE
              
              
              Note(s)Third
                  parties
              
              
              
              
              $
              25,527
              
              $
              23,393Related
                  parties
              
              
              11
              
              
              -
              
              
              10,471TOTAL
                  NET REVENUE
              
              
              
              
              
              25,527
              
              
              33,864COST
                  OF REVENUE
              
              
              
              
              
              9,612
              
              
              24,203GROSS
                  PROFIT
              
              
              
              
              
              15,915
              
              
              9,661OPERATING
                  EXPENSESSelling
                  expenses
              
              
              
              
              
              234
              
              
              175General
                  and administrative expenses
              
              
              
              
              
              3,334
              
              
              3,217TOTAL
                  OPERATING EXPENSES
              
              
              
              
              
              3,568
              
              
              3,392INCOME
                  FROM OPERATIONS
              
              
              
              
              
              12,347
              
              
              6,269OTHER
                  INCOME
              
              
              
              
              
              23
              
              
              14INTEREST
                  EXPENSE
              
              
              
              
              
              (1
              )
              
              (127
              )INCOME
                  BEFORE INCOME TAX
                AND
                  MINORITY INTERESTS
              
              
              
              
              
              12,369
              
              
              6,156INCOME
                  TAX: CURRENT
              
              
              7
              
              
              (1,746
              )
              
              (181
              )INCOME
                  BEFORE MINORITY INTERESTS
              
              
              
              
              
              10,623
              
              
              5,975MINORITY
                  INTERESTS
              
              
              
              
              
              (541
              )
              
              (1,554
              )NET
                  INCOME
              
              
              
              
              
              10,082
              
              
              4,421OTHER
                  COMPREHENSIVE INCOMEForeign
                  currency translation adjustment
              
              
              
              
              
              423
              
              
              -COMPREHENSIVE
                  INCOME
              
              
              
              
              $
              10,505
              
              $
              4,421WEIGHTED
                  AVERAGE NUMBER
                OF
                  SHARES (in thousand)
              
              
              
              
              
              29,273
              
              
              26,988EARNINGS
                  PER SHARE (in dollars)
              
              
              
              
              $
              0.34
              
              $
              0.16
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 F-4
  **T-BAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**
 **For
        the years ended March 31, 2006 and 2005**
 **(In
        thousand of United States dollars)**
 **COMMON
                    STOCK**
                ****
                **ADDITIONAL
                    PAID-IN CAPITAL**
                ****
                **PUBLIC
                    WELFARE FUND**
                ****
                **STATUTORY
                    SURPLUS FUND**
                ****
                **RETAINED
                    EARNINGS**
                ****
                **ACCUMULATED
                    OTHER COMPREHENSIVE INCOME**
                ****
                **TOTAL**
                  **STOCKHOLDERS’
                    EQUITY**No.
                    of sharesBalance,
                    April 1, 2004 a
                  recapitalized(Notes
                    1 and 13)
                
                
                30,088,174
                
                $
                30
                
                $
                1,462
                
                $
                -
                
                $
                63
                
                $
                1,196
                
                $
                -
                
                $
                2,751Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                4,421
                
                
                -
                
                
                4,421Transfer
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                450
                
                
                (450
                )
                
                -
                
                
                -Foreign
                    currency
                  translation
                    adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (7
                )
                
                (7
                )Balance,
                    April 1, 2005
                
                
                30,088,174
                
                
                30
                
                
                1,462
                
                
                -
                
                
                513
                
                
                5,167
                
                
                (7
                )
                $
                7,165Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                10,082
                
                
                -
                
                
                10,082Transfer
                
                
                -
                
                
                -
                
                
                -
                
                
                809
                
                
                937
                
                
                (1,746
                )
                
                -
                
                
                -Foreign
                    currency
                  translation
                    adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                167
                
                
                -
                
                
                423
                
                
                590Balance,
                    March 31,
                  2006
                
                
                30,088,174
                
                $
                30
                
                $
                1,462
                
                $
                809
                
                $
                1,617
                
                $
                13,503
                
                $
                416
                
                $
                17,837
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-5
  **T-BAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
        the years ended March 31, 2006 and 2005**
 **(In
        thousand of United States dollars)**


**FOR
                THE YEAR ENDED MARCH 31,**
            ********
            ****
            **2006**
            ****
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income
            
            $
            10,082
            
            $
            4,421Adjustments
                to reconcile net income to net cash
              generated
                from operating activities:Depreciation
            
            
            154
            
            
            136Amortization
            
            
            13
            
            
            12Allowances
                for doubtful receivables
            
            
            274
            
            
            89Minority
                interests
            
            
            541
            
            
            2,059Loss
                on disposal of property, plant and equipment
            
            
            5
            
            
            -Changes
                in operating assets and liabilities:Increase
                in accounts receivable
            
            
            (5,866
            )
            
            (8,672
            )(Increase)/decrease
                in notes receivable
            
            
            (7,759
            )
            
            2,386Decrease
                in prepayments, deposits and other receivables
            
            
            317
            
            
            528Decrease/(increase)
                in inventories
            
            
            6,300
            
            
            (5,270
            )(Decrease)/increase
                in accounts payable
            
            
            (3,400
            )
            
            4,725Increase
                in accruals and other payables
            
            
            1,013
            
            
            2,710Decrease
                in bills payable
            
            
            -
            
            
            (535
            )Increase/(decrease)
                in receipts in advance
            
            
            834
            
            
            (2,287
            )(Decrease)/increase
                in VAT recoverable
            
            
            (391
            )
            
            471Increase
                in income tax payable
            
            
            1,746
            
            
            181Net
                cash generated from operating activities
            
            
            3,863
            
            
            954**CASH
                FLOWS FROM INVESTING ACTIVITES**Acquisition
                of property, plant and equipment
            
            
            (5
            )
            
            (333
            )Acquisition
                of intangible assets
            
            
            (2
            )
            
            (60
            )Net
                cash used in investing activities
            
            
            (7
            )
            
            (393
            )**CASH
                FLOW****S
                FROM FINANCING ACTIVITIES**Decrease
                in minority interests
            
            
            88
            
            
            -Increase
                in amounts due to shareholders
            
            
            2
            
            
            -Net
                cash generated from financing activities
            
            
            90
            
            
            -Effect
                of exchange rate changes on cash
            
            
            21
            
            
            (7
            )**Net
                increase in cash and cash equivalents**
            
            
            3,967
            
            
            554**Cash
                and cash equivalents at beginning of year**
            
            
            706
            
            
            152**Cash
                and cash equivalents at end of year**
            
            $
            4,673
            
            $
            706SUPPLEMENTAL
                INFORMATIONIncome
                taxes paid
            
            $
            -
            
            $
            -Interest
                paid
            
            $
            1
            
            $
            127




The
      accompanying notes are an integral part of these
      consolidated financial statements.




F-6





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2006**




**1.
      The Company and subsidiaries**





T-Bay
      Holdings, Inc. (the “Company” or T-Bay) was incorporated under the laws of the
      State of Utah on August 8, 1984 as “Sharus Corporation” with authorized common
      stock of 50,000,000 shares with a par value of $0.001. On June 13, 1989, the
      domicile of the Company was changed to the state of Nevada in connection with
      a
      name change to “Golden Quest, Inc.”.  On January 7, 2002, the name was
      changed to “T-Bay Holdings, Inc.” as part of a reverse stock split of 400 shares
      of outstanding stock for one share and on November 23, 2004, the Company
      increased the authorized common stock to 100,000,000 shares with a par value
      of
      $.001 as part of a reverse stock split of 20 outstanding shares for one
      share.





The
      principal business activity of T-Bay has been locating and recovery of
      archeological artifacts, precious metals, and other valuables from shipwrecks.
      During 1992, T-Bay abandoned its operations and became inactive. T-Bay is
      considered to be in the development stage after 1992.





On
      August
      16, 2005, pursuant
      to an Agreement and Plan of Reorganization, T-Bay issued 18,550,000 shares
      of
      its common stock for all of Amber Link International Limited’s (“Amber Link”)
      and Wise Target International Limited’s (“Wise Target”) outstanding shares of
      common stock (the “Merger”). Amber Link and Wise Target are two of the owners of
      Shanghai Sunplus Communication Co. Ltd. (“Sunplus”). As of March 31, 2006, Wise
      Target owned a 74% interest and Amber Link owned a 21% interest in Sunplus.
      After the Merger and as of March 31, 2006, T-Bay indirectly owned a 95% interest
      in Sunplus.





Wise
      Target was incorporated on April 24, 2002 under the International Business
      Companies Act in the British Virgin Islands.





Amber
      Link was incorporated on May 10, 2002 under the International Business Companies
      Act in the British Virgin Islands.





Sunplus
      was established on October 17, 2002 under the laws of The People’s Republic of China
      (“PRC”) as a Sino-foreign joint venture specialized in the development,
      production and sales of electronic telecommunication devices. During the two
      years ended March 31, 2006 and 2005, Sunplus was engaged in the design,
      production and sales of mobile phones in the PRC. Sunplus was owned by Wise
      Target (74%), Amber Link (21%) and Shanghai Fanna Industrial Product Design
      Co.,
      Ltd (“Shanghai Fanna”) (5%). Sunplus commenced operations on May 1, 2003. At
      March 31, 2006, Sunplus has approximately 150 staff, mostly engineers and
      software programmers.





**2.
      Summary of Significant Accounting Policies**





**(a)
      Basis of Preparation and Consolidation**





The
      consolidated financial statements for the year ended March 31, 2006 include
      the
      financial statements of T-Bay and its subsidiaries (hereinafter, referred to
      individually or collectively as the “Company”) and are prepared in conformity
      with accounting principles generally accepted in the United States of America.
      All significant inter-company balances and transactions have been eliminated
      in
      consolidation.





For
      accounting purpose, the Merger is being reflected as a recapitalization of
      Amber
      Link and Wise Target, with Amber Link and Wise Target as the acquirers. The
      18,550,000 T-Bay shares issued are treated as issued by Amber Link and Wise
      Target for cash and are shown as outstanding for all periods
      presented.





The
      consolidated balance sheet as of March 31, 2006 includes T-Bay, Wise Target,
      Amber Link and Sunplus. The consolidated statement of operations for the year
      ended March 31, 2006 includes Wise Target and Sunplus for the full year, Amber
      Link and T-Bay from August 16, 2005.  The consolidated statement of
      operations for the year ended March 31, 2005 includes Wise Target and Sunplus
      only.





F-7





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**




**(b)
      Use of Estimates**





In
      preparing financial statements in conformity with US GAAP, management is
      required to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and the disclosure of contingent assets and liabilities
      at the date of the financial statements and revenues and expenses during the
      reported periods. Significant estimates include depreciation and allowance
      for
      doubtful receivables. Actual results could differ from those
      estimates.





**(c)
      Cash and Cash Equivalents**





The
      Company considers all highly liquid investments with original maturities of
      three months or less at the time of purchase to be cash equivalents. As of
      March
      31, 2006, the Company did not have any cash equivalents.





**(d)
      Allowance for Doubtful Receivables**





The
      Company recognizes an allowance for doubtful receivables to ensure accounts
      and
      other receivable are not overstated due to uncollectibility. Allowance for
      doubtful receivables is maintained for all customers based on a variety of
      factors, including the length of time the receivables are past due, significant
      one-time events and historical experience. An additional allowance for
      individual accounts is recorded when the Company becomes aware of a customer’s
      inability to meet its financial obligation, such as in the case of bankruptcy
      filings or deterioration in the customer’s operating results or financial
      position. If circumstances related to customers change, estimates of the
      recoverability of receivables would be further adjusted (See Note 3).





**(e)
      Inventories**





Inventories
      comprise raw materials, work in progress and finished goods and are stated
      at
      the lower of cost or market. Market value represents replacement cost for raw
      materials and net realizable value for finished goods and work in progress.
      Substantially all inventory costs are determined using the weighted average
      basis. Costs of finished goods include direct materials, subcontracting charges
      and other overhead before the goods are ready for sale. Inventory costs do
      not
      exceed net realizable value.





**(f)
      Property, Plant and Equipment**





Property,
      plant and equipment is stated at cost. Depreciation is provided principally
      by
      use of the straight-line method over the useful lives of the related assets,
      except for leasehold improvements, which are depreciated over their useful
      lives
      or the terms of their related leases, whichever is less. Expenditure for
      maintenance and repairs, which does not improve or extend the expected useful
      life of the assets, is expensed to operations while major repairs are
      capitalized.





Management
      estimates that property, plant and equipment have a 10% residual value, except
      for leasehold improvements. The estimated useful lives are as
      follows:





Leasehold
      improvements  Over
      lease terms


Machinery  5
      years


Office
      equipment  5
      years


Motor
      vehicles  5
      years





The
      gain
      or loss on disposal of property, plant and equipment is the difference between
      the net sales proceeds and the carrying amount of the relevant assets, and,
      if
      any, is recognized in the statement of operations and comprehensive
      income.




F-8





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**




**(g)
      Intangible Assets**





Intangible
      assets consist of software and patents and are amortized using the straight-line
      method over their estimated useful life of 5 years.





**(h)
      Impairment of Assets**





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
      "Accounting for Impairment or Disposal of Long-Lived Assets", the Company
      evaluates its long-lived assets to determine whether later events and
      circumstances warrant revised estimates of useful lives or a reduction in
      carrying value due to impairment. If indicators of impairment exist and if
      the
      value of the assets is impaired, an impairment loss would be recognized. As
      of
      March 31, 2006, no impairment loss has been recognized.





**(i)
      Income Taxes**





The
      Company accounts for income taxes under SFAS No. 109, "Accounting for Income
      Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recognized
      for the future tax consequences attributable to differences between the
      financial statements carrying amounts of existing assets and liabilities and
      their respective tax bases. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years in
      which those temporary differences are expected to be recovered or settled.
      Under
      SFAS No. 109, the effect on deferred tax assets and liabilities of a change
      in
      tax rates is recognized in income in the period that includes the enactment
      date.





The
      Group
      reviewed the differences between the tax bases under PRC tax laws and financial
      reporting under US GAAP, and no material differences were found, thus, there
      were no deferred tax assets or liabilities arising from the operations of
      Sunplus in the PRC as of March 31, 2006.





Under
      current PRC tax laws, no tax is imposed in respect to distributions paid to
      owners except individual income tax.





**(j)
      Revenue Recognition**





Revenue
      from goods sold is recognized when title has passed to the purchaser, which
      generally is at the time of delivery. Revenue from design services is recognized
      when earned on the basis of the terms specified in the underlying contractual
      agreements.





**(k)
      Research and development costs**





Research
      and development costs consist of expenditures incurred during the course of
      planned research and investigation aimed at discovery of new knowledge which
      will be useful for developing new products or significantly enhancing existing
      products, and the implementation of such through design and testing of product
      alternatives. All expenses incurred in connection with the Company’s research
      and development activities are charged to current income. During the two years
      ended March 31, 2006 and 2005, research and development costs amounting to
      $176,000 and $73,000, respectively, were charged to operations and are included
      in cost of revenue.




F-9





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**




**(l)
      Foreign Currency Transactions**





The
      functional currencies of the Company are U.S. dollars, Hong Kong dollars and
      the
      Renminbi, and its reporting currency is U.S. dollars.  The
      Company’s balance sheet accounts are translated into U.S. dollars at the
      year-end exchange rates and all revenue and expenses are translated into U.S.
      dollars at the average exchange rates prevailing during the periods in which
      these items arise. Translation gains and losses are deferred and accumulated
      as
      a component of other comprehensive income in stockholder’s equity. Transaction
      gains and losses that arise from exchange rate fluctuations from transactions
      denominated in a currency other than the functional currency are included in
      the
      consolidated statement of operations as incurred. The translation gain/loss
      for
      the years ended March 31, 2006 and 2005 was recorded as a separate component
      of
      stockholder’s equity.





The
      PRC
      government imposes significant exchange restrictions on fund transfers out
      of
      the PRC that are not related to business operations. These restrictions have
      not
      had a material impact on the Company because it has not engaged in any
      significant transactions that are subject to the restrictions.





**(m)
      Fair Value of Financial Instruments**





SFAS
      No.
      107, “Disclosures about Fair Values of Financial Instruments”, requires
      disclosing fair value to the extent practicable for financial instruments that
      are recognized or unrecognized in the balance sheet. The fair value of the
      financial instruments disclosed herein is not necessarily representative of
      the
      amount that could be realized or settled, nor does the fair value amount
      consider the tax consequences of realization or settlement.





For
      certain financial instruments, including cash, accounts, notes and other
      receivables, accounts payable, accruals and other payables, it was assumed
      that
      the carrying amounts approximate fair value because of the near term maturities
      of such obligations.





**(n)
      Earnings Per Share**





Basic
      earnings per share is computed by dividing the earnings for the year by the
      weighted average number of common shares outstanding for the year. Diluted
      earnings per share reflects the potential dilution of securities by including
      other potential common stock, including stock options and warrants, in the
      weighted average number of common shares outstanding for the year, if dilutive.
      There are no common stock equivalents in 2005 and 2006. Shares issued in the
      Merger (see Notes 1 and 13) are presented as outstanding for all periods.





**(o)
      Profit Appropriation**





In
      accordance with PRC regulations, Sunplus is required to make appropriations
      to
      the statutory surplus reserve, based on after-tax net income determined in
      accordance with PRC GAAP. Appropriation to the statutory surplus reserve should
      be at least 10% of the after-tax net income determined in accordance with PRC
      GAAP until the reserve is equal to 50% of the entity’s registered capital.
      Appropriations to the statutory public welfare fund and discretionary surplus
      reserve fund are made on the same basis as statutory surplus fund, normally
      at
      5%-10% or higher rates and are generally optional at the discretion of the
      Board
      of Directors. Statutory surplus reserve is non-distributable other than in
      liquidation.





**(p)
      Preferred stock**





No
      shares
      of preferred stock have been issued or are outstanding. Dividends, voting rights
      and other terms, rights and preferences of the preferred shares have not been
      designated but may be designated by our board


of
      directors from time to time.





F-10





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**




**3.
      Allowance for Doubtful Receivables**





**MARCH
                31, 2006**(US$)Balance,
                beginning of year
            
            
            89Additions
            
            
            274Balance,
                end of year
            
            
            363





**4.
      Inventories**





As
      of
      March 31, 2006, inventories consisted of the following:





**MARCH
                31, 2006**(US$)Raw
                materials
            
            1,874Work
                in progress
            
            358Finished
                goods
            
            1822,414Less:
                allowance for losses
            
            
            (432
            )Total
            
            
            1,982




F-11





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**5.
      Property, Plant and Equipment, Net**





**MARCH
                31, 2006**(US$)CostLeasehold
                improvements
            
            
            -Machinery
            
            
            205Office
                equipment
            
            
            361Motor
                vehicles
            
            
            95661Accumulated
                depreciationLeasehold
                improvements
            
            
            -Machinery
            
            
            68Office
                equipment
            
            
            162Motor
                vehicles
            
            
            33263Carrying
                valueLeasehold
                improvements
            
            
            -Machinery
            
            
            137Office
                equipment
            
            
            199Motor
                vehicles
            
            
            62398





Depreciation
      expense for each of the years ended March 31, 2006 and 2005 was approximately
      $154,000 and $136,000, respectively.





**6.
      Intangible Assets, Net**





**MARCH
                31, 2006**(US$)CostSoftware
            
            
            63Patents
            
            
            366Accumulated
                amortizationSoftware
            
            
            24Patents
            
            
            125Carrying
                valueSoftware
            
            
            39Patents
            
            
            241





Amortization
      expense for each of the year ended March 31, 2006 and 2005 was approximately
      $13,000 and $12,000, respectively. The estimated amortization expense for the
      five years ending March 31, 2007, 2008, 2009, 2010 and 2011 amounts to
      approximately $13,00, $13,000, $13,000, $1,000 and $nil
      respectively.





F-12





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**7.
      Income Taxes**





Amber
      Link and Wise Target are not subject to income taxes in any tax
      jurisdiction.





No
      provision for income tax for T-Bay has been made as it incurred a loss for
      the
      year.





Sunplus
      is subject to PRC Income Tax. Pursuant to the PRC Income Tax Laws, the
      prevailing statutory rate of enterprise income tax in Shanghai is 27% (24%
      national income tax plus 3% local income tax).





Pursuant
      to the relevant laws and regulations in the PRC, Sunplus is entitled to an
      exemption from PRC income tax for two years starting from its first profitable
      year. As Sunplus’ statutory year-end is December 31, the tax exemption applied
      to the period from January 1, 2003 to December 31, 2004. Sunplus is also
      entitled to three years of 50% exemption after the expiration of the two years
      of full exemption. The 50% tax exemption applies to the period from January
      1,
      2005 to December 31, 2007.





A
      reconciliation between taxes computed at the United States statutory rate of
      34%
      and the Group’s effective tax rate is as follows:-





**YEAR
                ENDED MARCH 31,**
            ********
            ****
            **2006**
            ****
            **2005**(US$)
            
            $
            (US$)Income
                before income tax
            
            
            12,369
            
            
            6,156Income
                tax on pretax income at statutory rate
            
            
            4,205
            
            
            1,662Effect
                of different tax rates of subsidiary
              operating
                in other jurisdictions
            
            
            (879
            )
            
            -Tax
                effect of non-deductible expenses
            
            
            160
            
            
            -Tax
                effect of non-taxable income
            
            
            (49
            )
            
            -Valuation
                allowance
            
            
            64
            
            
            -Tax
                effect of exemption
            
            
            (1,755
            )
            
            (1,481
            )Income
                tax
            
            
            1,746
            
            
            181





Sunplus
      is also subject to value-added tax (“VAT”), business tax and
      surtax.





As
      of
      March 31, 2006, T-Bay had accumulated net operating loss carryforwards for
      United States federal tax purposes of approximately of $4,876,000, that are
      available to offset future taxable income.  Realization of the net
      operating loss carryforwards is dependent upon future profitable operations.
       In addition, the carryforwards may be limited upon a change of control in
      accordance with Internal Revenue Code Section 382, as amended.
 Accordingly, management has recorded a valuation allowance to reduce
      deferred tax assets associated with the net operating loss carryforwards to
      zero
      at March 31, 2006 . The
      net
      operating loss carryforwards expires in years 2012 through 2025.





As
      of
      March 31, 2006, deferred tax assets consist of:-





**MARCH
                31, 2006**(US$)Net
                operating loss carryforwards
            
            
            1,658Less:
                valuation allowance
            
            
            (1,658
            )Net
            
            
            -




F-13




**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**8.
      Concentrations and Credit Risk**





The
      Company operates principally in the PRC and grants credit to its customers
      in
      this geographic region. Although the PRC is economically stable, it is always
      possible that unanticipated events in foreign countries could disrupt the
      Company’s operations.





Financial
      instruments that potentially subject the Company to a concentration of credit
      risk consist of cash, accounts and notes receivable.





At
      March
      31, 2006, the Company had credit risk exposure of uninsured cash in banks of
      approximately $4,673,000.





A
      substantial portion of revenue was generated from one group of customers for
      the
      year ended March 31, 2006 and 2005.





The
      net
      sales to customers representing at least 10% of net total sales are as
      follows:





**YEAR
                ENDED MARCH 31,**
            ********
            ****
            **2006**
            ****
            **2005**(US$)
            
            %
            
            (US$)
            
            %Customer
                A
            
            
            3,094
            
            
            12
            
            
            -Customer
                B
            
            
            2,175
            
            
            9
            
            
            24,056
            
            
            71Customer
                group A*
            
            
            17,194
            
            
            67
            
            
            28,035
            
            
            83





At
      March
      31, 2006, this group of customers accounted for 69% of net accounts receivable.
      The accounts receivable had repayment terms of not more than eighteen
      months.





The
      following customers had balances greater than 10% of the total accounts
      receivable as of March 31, 2006:





**YEAR
                ENDED MARCH 31,**
            ********
            ****
            **2006**(US$)
            
            %Customer
                A
            
            
            3,094
            
            
            21Customer
                C
            
            
            1,996
            
            
            13Customer
                D
            
            
            1,497
            
            
            10Customer
                group A*
            
            
            10,300
            
            
            69





*
      Customer A, B, C and D are in Customer group A





The
      Company does not require collateral to support financial instruments that are
      subject to credit risk.





F-14





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**9.
      Retirement and Welfare Benefits**





The
      full-time employees of Sunplus are entitled to staff welfare benefits including
      medical care, casualty, housing benefits, education benefits, unemployment
      insurance and pension benefits through a PRC government-mandated multi-employer
      defined contribution plan. Sunplus is required to accrue the employer-portion
      for these benefits based on certain percentages of the employees’ salaries. The
      total provision for such employee benefits was $319,000 and $342,000 for the
      two
      years ended March 31, 2006 and 2005, respectively. Sunplus is required to make
      contributions to the plans out of the amounts accrued for all staff welfare
      benefits except for education benefits. The PRC government is responsible for
      the staff welfare benefits including medical care, casualty, housing benefits,
      unemployment insurance and pension benefits to be paid to these employees.





**10.
      Credit facilities**





As
      of
      March 31, 2006, there were no unused bank credit lines. The previous bank credit
      lines of approximately $6,237,000 expired in March 2006. The credit facilities
      were guaranteed by Cosun Group Co., Ltd. (“Cosun”), an unrelated third party and
      two of Cosun’s directors.





**11.
      Related Party Transactions**





The
      Group
      engages in business transactions with the following related
      parties:




**(a)** 
      Li Xiaofeng, a stockholder of T-Bay.




**(b)** 
      CECT, a customer of Sunplus. A director of Sunplus was also a director of CECT.
      (The director resigned as a director of Sunplus on July 22, 2004)




**(c)** 
      Li Meilian, a stockholder of T-Bay.




**(d)** 
      LEA Management Group LLC (“LEAM”), a stockholder of T-Bay.




**(e)** 
      Eric Xue, a director of Sunplus.





The
      Group
      has the following transactions and balances with related parties:





**MARCH
                31, 2006**(US$)Other
                receivables-
                Li Xiaofeng
            
            9-
                Eric Xue
            
            615Other
                payable - LEAM
            
            
            25Long-term
                liabilitiesOther
                payable - Li Meilian
            
            
            2,791Other
                payable - Li Xiaofeng
            
            
            7733,564





The
      balances have no stated terms for repayment and are not interest bearing. The
      payables to Li Meilian and Li Xiaofeng are not repayable within the next twelve
      months.





F-15





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**11.
      Related Party Transactions (continued)**





**FOR
                THE YEAR ENDED MARCH 31,**
            ********
            ****
            **2006**
            ****
            **2005**(US$)
            
            (US$)Sales
                to CECT
            
            
            -
            
            
            10,471





During
      the year ended March 31, 2006, the Company paid $58,000 service fees to LEAM
      in
      respect of communications and consultancy services which were charged to
      operations.





**12.
      Commitments and Contingencies**





**(a)**  As
      of
      March 31, 2006, Sunplus leased office premises under an agreement expiring
      in
      2008.





Rental
      expenses for the two years ended March 31, 2006 and 2005 amounted to $265,000
      and $366,000, respectively, and are included in general and administrative
      expenses in the consolidated statements of operations.





The
      future minimum lease payments under the above-mentioned lease as of March 31,
      2006 are as follows:




(US$)**Year
                Ending March 31,**2007
            
            
            2252008
            
            
            187412




**(b)**Sunplus
      entered into a
      technology service contract with a customer for a period of three years starting
      from February 2003. Under this agreement, the Company paid customer


service
      fees of $38,000 and $34,000 in the years
      ended March 31, 2006 and 2005, respectively, which were charged to operations.
      The agreement was early terminated February 2006.


**(c)** 
As
      of
      March 31, 2006, Sunplus had capital commitments in relation to property, plant
      and equipment for a new office in the amount of $23,000.




**(d)** 
Wise
      Target had a capital commitment contracted for but not contributed in respect
      of
      an investment in Sunplus amounting to approximately $97,000 (HK$756,000) at
      March 31,


2006. (See
      Note
      15)


**13.
      Common Stock**





The
      number of shares of common stock presented as outstanding as of April 1, 2004
      in
      the consolidated statement of changes in stockholders’ equity includes the
      shares issued by the Company as a result of the reorganization as described
      in
      Note 1. Details of the number of shares presented are as follows:





**Number
                of shares**Outstanding
                shares as at April 1, 2004 prior to the reorganization
            
            8,438,174Issue
                of shares as payment for services
            
            3,100,000Issue
                of shares upon reverse merger
            
            
            18,550,000Number
                of shares of common stock presented in the consolidated
              statement
                of changes in stockholders’ equity as of April 1, 2004
            
            
            30,088,174




F-16





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**MARCH
      31, 2006**








**14.
      New Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123R, "Share-Based Payment, an Amendment of SFAS No. 123."  SFAS No. 123R
      requires companies to recognize in the statement of operations the grant-date
      fair value of stock options and other equity-based compensation issued to
      employees.  SFAS No. 123R is effective for the Group on April 1, 2006.
 The adoption of SFAS No. 123R is expected to have no material impact on
      the Company’s consolidated financial statements.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary Assets."
       The Statement is an amendment of APB Opinion No. 29.  SFAS No. 153
      eliminates the exception for non-monetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of non-monetary assets
      that do not have commercial substance.  SFAS No. 153 is effective for the
      year ending December 31, 2006. The adoption of SFAS No. 153 is expected to
      have
      no material impact on the Company’s consolidated financial
      statements.





In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections—a replacement of APB Opinion No. 20 and FASB Statement
      No. 3.” This Statement replaces APB Opinion No. 20, “Accounting
      Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in
      Interim Financial Statements.” SFAS No. 154 changes the requirements for
      the accounting for and reporting of a change in accounting principle.
      Previously, most voluntary changes in accounting principles required recognition
      through a cumulative adjustment within net earnings in the period of the change.
      SFAS No. 154 requires retrospective application to prior periods’ financial
      statements, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. SFAS No. 154 is effective
      for accounting changes that may be made by T-Bay beginning in the year ending
      March 31, 2007; however, the Statement does not change the specific transition
      provisions of any existing or future accounting pronouncements. The adoption
      of
      SFAS No. 154 will have no immediate effect on the Company’s consolidated
      financial position and results of operations.




**15.
      Subsequent Events**





Subsequent
      to the balance sheet date on April 4, 2006, Wise Target contributed the
      remaining $97,000 to Sunplus. (See Note 12d)




F-17